One of – if not the most – revolutionary innovations to impact the business world has been the inexorable rise of artificial intelligence (AI).
Over the past few years, the adoption of AI has become increasingly common by companies of all shapes and sizes, and it has had profound effects (both positive and negative) on the way we do business.
The realm of M&A is no different. Although it is not yet widely used in this sphere, AI algorithms have the potential to make a significant impact on the speed and efficacy of M&A processes. For instance, AI can streamline everything from deal sourcing to the due diligence process and even assisting with integration post-merger or acquisition.
In this article, we’re going to shine a spotlight on the ways in which AI is already influencing the M&A process.
Along the way, we’ll explore both the upsides and the downsides of using artificial intelligence to help us buy and sell our businesses and take a sneak peek at what the future may hold. Shall we begin?
How AI can help you sell your business
AI can bring several key benefits to anyone wanting to sell their business. These include:
- Helping to boost your company’s value
Before you embark on the selling process officially, it’s important to conduct a business valuation. This will give you an accurate picture of your company’s true market value, which will help you set the right price for both you and your potential buyers.
AI can assist with this by using your company’s data to highlight areas where value could be maximised. By taking advantage of these suggestions, you can then enhance the total value of your business and negotiate a higher price when you do find a buyer.
- Simplifying your sale
AI can streamline various aspects of the sale process, beginning by helping you to find the ideal target buyers for your business using your chosen criteria. It can also be of use by automating repetitive tasks and helping to make communication between you and your would-be buyer more straightforward.
- Assisting with your negotiations
AI can help with the negotiation process in a variety of ways, from assisting with legal and data reviews to providing invaluable information on the current market trends and how your competition is faring. These insights can help both parties make informed decisions and, ultimately, come to an agreement sooner.
How AI can help you buy a business
For those who have made the momentous decision to acquire another business, AI can prove extremely useful at every stage of the process.
- Finding potential prospects
The first hurdle any buyer must face when it comes to acquisition is finding potential prospects that might be interested in being purchased. With so many companies filling every possible market niche, whittling them down manually can be a complicated task.
This is where AI comes to the fore, with the capacity to screen numerous ‘possibles’ by your chosen criteria, such as their sector and financial performance. Being able to easily access and narrow down the businesses that most closely match your requirements can speed up the initial process and help set you firmly on the path toward a successful acquisition.
- Providing accurate market analysis
Having a deep and nuanced understanding of your chosen market is essential if you want to make a beneficial acquisition. AI analytics tools can help you acquire this essential knowledge by quickly and efficiently trawling through all the relevant market data. These analytics tools can then highlight emerging trends and shed invaluable light on the status of competitors.
Buyers can use this information to help them select potential purchase prospects that will increase their own position in the market, or that will allow them to enter new flourishing markets.
- Enhancing due diligence
Another area of the M&A process where AI can shine is due diligence. This phase is arguably the most critical of the entire acquisition process, as mistakes made here have the potential to be financially catastrophic.
AI’s ability to analyse vast swathes of data in an accurate and insightful way can help to significantly reduce the risk of human error, while streamlining the entire due diligence process.
Relying on the insights provided by AI, potential buyers of a business will be able to gain an accurate picture of the pros and cons associated with the purchase of that company. AI can also be used to make communication more effective during due diligence, and to automate repetitive tasks.
The pitfalls of artificial intelligence in M&A
While it may seem like the use of artificial intelligence in mergers and acquisitions can bring nothing but good, the truth is inevitably more complicated. As with all innovations, AI comes with a unique set of drawbacks which it is important to understand before relying too heavily on its capabilities.
These drawbacks include:
- Compliance Issues
Perhaps the biggest problem surrounding the use of AI in M&A – or, indeed, any sphere of business – is the question of compliance. The regulatory landscape surrounding AI is still evolving, and the use of AI – particularly to handle sensitive information – is hedged in by a thicket of legislation and confusion. As a result, it can be difficult to know how to use it safely and effectively without getting into trouble.
For example, an over-reliance on AI could see a buyer fall foul of algorithmic bias or possibly even result in a serious security risk, opening the door to potential cyber-attacks.
- Lack of complexity
AI can be deeply beneficial in the M&A process from a data analysis and automation standpoint. However, successful business deals are not brokered on these elements alone.
There are also a variety of complex and intensely human aspects to consider – for instance, does the business you’re thinking of buying have a similar company culture to your own? Does it have a management team you know you would probably clash with? These human concerns are just as important to consider as the data-based insights provided by artificial intelligence.
- Accuracy Concerns
Finally, while there is no denying AI’s remarkable ability to sift through mind-boggling amounts of data in no time, there is also no absolute guarantee that the conclusions it comes up with are accurate.
After all, the answers provided by AI will only be as sound as the data it is analysing. If there are any inaccuracies or inconsistencies, or any significant holes in the data, these will play a role in the insights the AI system comes up with. In short, 100% accuracy is not guaranteed.
What does the future hold?
The benefits and the drawbacks of using AI are hopefully clear to see. What is not so obvious is how AI will continue to evolve and influence M&A in the future. With AI systems continuing to develop at a rapid rate, increasing in sophistication, there seems little doubt that AI will have a big impact on the world of mergers and acquisitions. Potential innovations to look forward to may include the creation of dedicated virtual deal spaces, bespoke M&A forecasts, and even more enhanced automation and market analysis.
That being said, there can be no denying the importance of the human touch when it comes to brokering successful business deals – especially when it comes to communication, negotiation, and overseeing the integration process post-sale.
While AI may become an integral part of M&A, the requirement for human complexity, nuance and empathy will never fade.
Here at Harris Acquire, we pride ourselves on providing that all-important human touch, going above and beyond to ensure our buyers and sellers are provided with an effective, friendly and professional service. We handle every stage of the M&A process with care and attention, drawing on years of expertise in the industry.
If you’d like to contact us regarding a potential merger, a sale or a purchase, don’t hesitate to give us a call on 01926 757100 or send an email to Hello@harrisacquire.com.