Generative AI in M&A: Innovations and Applications

AI is making an undeniable impact in the business world. The latest advances can help M&A advisors, consultants, and analysts make strategic decisions with more accurate insights.

By integrating generative AI into their workflow, these professionals can easily find risks or opportunities in a deal, decrease the amount of time invested in repetitive tasks through automation, and overall speed up the whole M&A process.

This article offers further insight into how AI can transform mergers and acquisitions.

Why use generative AI in M&A?

When it comes to M&As, Artificial Intelligence can be used to identify potential venture targets, review documentation, and automate other tasks that can be time-consuming for business analysts and experts. 

According to Bain & Company, it’s expected that in the following 3 years, the use of generative AI for M&A processes will increase by up to 80% compared to the 16% that is currently used.

In an exclusive talk with Boopos, Corey Haines, cofounder of Factory and Swap Files, talked about how the way a product uses AI can be a differentiator beyond the fact of using new tech.

Companies already using generative AI for their M&A deals employ this tech to pre-screen potential business targets, review information in the due diligence process, identify possible data issues that can avoid deploying extra resources in the business deal, and more.

The same study by Bain & Company found that around 58% of gen AI used in M&A is focused on conducting due diligence, while 50% of the users employ the tech to source and screen targets. 

How will AI impact M&A?

1. Strategic decisions 

Gen AI can help analyze market trends, review competitors’ strategies, and go over historical data. By using this technology, analysts can offer data-driven suggestions regarding the potential of a target company.  With the evolution of AI, we can expect to see how its use will increase in popularity to make more strategic decisions. 

2. Better targeting

By using gen AI, firms can have an easier time finding new business targets to acquire. By applying algorithms, it’s easier to spot patterns and develop meaningful insights that meet the required criteria for an M&A. 

3. A tool for advisors

When it comes to M&A, advisors are the experts who can offer their expertise to firms that are considering purchasing another company. Gen AI is capable of analyzing large amounts of data and spotting patterns. Advisors can use these insights to provide valuable recommendations. 

4. Assisting the negotiation process

Negotiations are a part of an M&A that so far can’t be automated. However, AI still can have a positive impact on them. This technology can offer valuable insights and detailed analysis of the business trends to be used when negotiating for a better deal. 

5. Due diligence

Conducting due diligence can take a lot of time during the M&A. The seller has to gather and store all the essential documentation in a virtual data room, and potential buyers have to review it to ensure everything aligns with their understanding and expectations from the business. 

With gen AI, it’s easier and faster to conduct the due diligence process, especially the analysis of financial documents, and risk assessment. 

6. Business valuation

When a business goes on sale, it’s highly recommended that the owner gets a valuation from a broker to help them establish an asking price in the market. Gen AI can also help to do so by not only reviewing the business's internal variables (revenue streams, cash flow, client base, and more) but also by adding into the mix the market trends, competitors' performance, and even growth projections for the future. 

7. Post-merger integration

Once the deal is sealed, teams from both companies have to work on integrating the businesses. By using AI tools in this final M&A step, organizations can set clear goals and metrics to help them pinpoint the success of the integration.

Tips for using Gen AI in M&A

For those ready to fully embrace the use of Gen AI in their M&A processes and are wondering how they can do it, here are some tips for starters.

1. Use gen AI where it can give you more value

Fortunately, Generative AI can be used differently according to the business’ goal. If the organization spends too many resources executing and completing the M&A, perhaps it would be wise to use technology in those tasks that can be automated and time-consuming. 

On the other hand, if the firm is focused on finding potential businesses for purchase, then Gen AI can be used to reach the goal by analyzing market trends and financial results and assessing risks from a prospective business. 

2. To develop or adopt?

Creating in-house technology helps organizations nail down their requirements since they create a solution that fits like a glove. However, doing so is expensive and time-consuming. So, any organization that is starting to consider using AI should establish if they instead develop their technology in-house or adapt their needs to the current solutions in the market. 

3. Implement the right safety measures

Before fully adopting the use of gen AI in the organization, there must be safety measures that can deal with potential security breaches or intellectual property infringement. Because of this, firms must hold their teams to the highest ethical standards and, at the same time, provide them with the proper tools to be on the lookout for any of these potential issues. 

4. Plan for future insights

One of today's most important assets is data. Firms focused on M&A can create plans to use the information they come across during their procedures. This is not aimed at selling the data or sharing it with their parties; it is about how they can use it to improve their internal processes and, therefore, develop a competitive advantage that can help them stand out in the market and at the same time make more accurate and strategic business decisions. 

Leverage Boopo's data-driven approach to find profitable businesses

At Boopos, you can find profitable online businesses for sale. Our platform uses a data-driven approach to find opportunities and connects sellers and buyers to negotiate the best possible deal.

Review the available businesses in our listing and learn more about their KPIs to find the perfect fit.