AI’s Impact on M&A and Why Human Involvement Is Necessary

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man and machine shaking hands and the importance of human involvement in M&A AI

Artificial Intelligence (AI) is transforming industries worldwide, promising improved user experience, business efficiency, customer service, and productivity gains in nearly every sector in which it’s been implemented. In turn, investment interest in the technology has been rapidly increasing. The funding of AI-focused companies and technologies reached $13.1 billion in Q1 2024, up 24% from the previous quarter, ultimately fueling its quick growth, with expectations that it’s market size will reach $407 billion in 2027. It’s important to note human involvement is fundamental to the success of AI in M&A.

Some of this M&A activity has already appeared on Datasite’s platform, which facilitates more than 14,000 new deals annually, in the form of a rebound of technology, media and telecommunications (TMT) mergers and acquisitions (M&A) activity. Businesses can’t afford to fall behind the pace of innovation via available technologies, and M&A offers one route to fulfilling these objectives.

Dealmakers

From a deal volume perspective, TMT is leading the way this year, even as TMT deal-kick offs on Datasite dipped year-over-year (YoY) by 5% in Q4 2023 and were off 3% in Q1 2024. TMT M&A continues to dominate because of the digital imperative being felt throughout the cross-section of industries. For example, increased energy demands to fuel the data centers required to power AI’s infrastructure could mean there will be more green energy deals to counteract AI emissions. In the six months from October 2023 to March 2024 energy deals, particularly asset sales, on Datasite were up 13%. Since this figure represents deals at their inception, rather than announced, it offers a glimpse into potential M&A activity in the coming six to nine months.

AI isn’t only grabbing the attention of dealmakers as a significant investment area, but also acting as a technology they can use to better manage deals themselves. For instance, AI can assist in identifying potential M&A targets by analyzing vast datasets and market trends. By using anonymized private equity and other transaction activity from within a closed and secure platform, some AI-powered applications are already helping dealmakers identify deal targets faster.

AI can also aid in the valuation process by providing objective analyses based on historical data and market factors. However, while AI can enhance accuracy and efficiency in valuations, human judgment remains essential, especially in evaluating qualitative factors and forecasting.

Additionally, by automating repetitive and time-consuming tasks, AI enables dealmakers to focus on strategic-level decisions and creative thinking. In fact, achieving a balance between AI and human involvement is key to maximizing productivity and outcomes.

Yet, some are hesitant to adopt the technology and many M&A professionals are proceeding cautiously when it comes to integrating AI, especially generative AI (GenAI), into their core processes. With concerns around data privacy and security, research shows that over 70% of global dealmakers want the technology regulated. This may also explain, in part, why over 60% of dealmakers say their organizations have low GenAI adoption or are only using it experimentally.

Conclusion

Still, most dealmakers aren’t blind to the opportunities AI can deliver. Around 40% of dealmakers acknowledged they had witnessed increased productivity through more streamlined processes, with over half saying it has the potential to speed up the M&A process by 50%. Additionally, as collaboration between industry players and governments continue – Europe just set a global benchmark for regulation of the technology – AI adoption may become a greater focal point this year. Looking ahead, it’s clear AI and GenAI will continue to be catalysts for dealmaking activity over the next few years, including from companies looking to acquire AI technologies for optimized workflows, to leveraging new tools to increase M&A efficiency. Keep in mind the importance of human involvement in this process.

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