In the world of mergers and acquisitions (M&A), due diligence is the all-encompassing and critical process of evaluating a target company. It entails validating financials, assessing the risks involved in a particular transaction, understanding operations and identifying the target company’s strengths and weaknesses. In short, the process of due diligence is what separates a strategic business decision from a costly mistake.
The process of due diligence in M&A is time-consuming and often expensive. It takes weeks, sometimes months, of combing through documents related to every aspect of a business. Artificial Intelligence (AI) platforms such as Kira and Westlaw’s Co-Counsel can assist by speeding up document review and boosting efficiency which, in turn, frees up time and allows deal teams to focus attention and resources on other vital areas of a deal.
Why Traditional Deal Teams Still Matter
With the rise of AI-powered due diligence tools, you may be wondering whether traditional deal teams are still a necessary part of the due diligence process, or if AI-powered due diligence is where the industry is headed. The short answer: amid a technology boom where the use of AI tools to assist with various aspects of a deal is increasing, traditional deal teams remain indispensable. Here’s why:
- AI is adept at identifying patterns and anomalies, but it lacks strategic context. Experienced dealmakers can interpret complex and often ambiguous information to make forward-looking decisions that align with broader business goals for a specific client. Despite the advances of AI, it cannot interpret nuances or evaluate whether a deal aligns with a company’s long-term values.
- Traditional deal teams often consist of experts spanning across multiple areas of the law, such as employment, tax, intellectual property and real estate, to name a few. AI can assist, but it cannot provide cross-functional insight the way traditional deal teams can because AI lacks the ability to provide specialized interpretation, industry-specific knowledge and to engage in collaborative decision-making.
- AI is not infallible. Oversight from experienced attorneys is necessary to validate, interpret and problem-solve when it comes to complex legal issues. AI can assist by boosting speed and efficiency, but it cannot replace the necessary judgment and creativity of an experienced deal team.
- The scope of document and information production to the other side of a deal in M&A is often reached through intricate negotiation processes. Traditional deal teams consist of experienced attorneys who are capable of handling delicate negotiations and advocating for the best interests of their client when it comes to what is or is not disclosed throughout the deal process.
AI is undeniably changing the landscape of M&A by transforming the due diligence process. However, traditional deal teams remain an essential component of the fast-paced, rigorous and strategic process of buying, selling or merging businesses. When integrated effectively, AI enables traditional deal teams to be faster, smarter, and more thorough, freeing up time for high-value, judgment-driven decisions in the deal process that only experienced professionals can make.
