An increasing number of consultancies and PE firms are modernising the M&A process with the help of AI, and it’s not hard to see why. With AI due diligence research tools, businesses can automate and speed up a number of time-consuming tasks, making the entire process more efficient and accurate.
So, what exactly is AI due diligence? And what benefits does it offer to businesses looking to make a successful acquisition? Here’s what you need to know about the future of decision-making in M&A that’s fast becoming the norm. We look at the benefits as well as the risks and challenges presented by emerging technologies.
What Is AI Due Diligence?
Artificial intelligence due diligence is the process of using AI technologies to assess a target company during the M&A process. This can include everything from financial analysis and market research to competitive analysis and customer sentiment analysis.
AI due diligence is often used in conjunction with traditional human-led due diligence, providing a more comprehensive overview of a target company. Increasingly, businesses are trusting AI to provide accurate and reliable insights that can help inform their decision-making.
The Need for Speed
AI-powered enhanced due diligence meets a pressing need for speed and accuracy in M&A. In a fast-paced and competitive market, businesses need to be able to move quickly and make decisions with confidence.
With AI due diligence, businesses can automate tasks that would traditionally be carried out by humans. This frees up time and resources so that businesses can focus on other aspects of the M&A process.
What’s more, AI can provide a level of accuracy and detail that human analysts simply cannot match. By harnessing the power of data, businesses can gain a comprehensive understanding of a target company that would otherwise be impossible to achieve.
One thing’s for sure, we’re not short on data, and it’s only going to increase. It’s estimated that by 2025, we will generate 181 zettabytes of data per year, (that’s 181,000,000,000,000,000,000,000 bytes!). For context, we produced 79 zettabytes of data in 2021.
With all that data available, the challenge is gathering and processing relevant data and making sense of it while it’s still useful to inform decision-making. This is where AI comes in.
The Benefits of AI Due Diligence?
There are several reasons why AI is fast becoming the go-to solution for businesses looking to streamline their M&A process. Here are just a few of the benefits that AI due diligence can offer:
As mentioned, one of the key benefits of AI is its ability to speed up the M&A process by automating tasks that would traditionally be carried out by a team of humans and take months to do.
With AI, businesses can gain a more accurate and comprehensive understanding of a target company. AI is less subject to human error or bias, meaning the insights it provides are generally more reliable.
A word of warning: not all AI assessment tools are equally accurate. When choosing an AI tool for your business, make sure to do your research and select a tool that has been created with data researchers and analysts, and is regularly updated with improvements.
Firms are fast-adopting AI for due diligence, but it’s still in its early stages. Compared to other industries, M&A has been comparatively slow when it comes to AI adoption. For now, this presents a unique opportunity for businesses to gain a competitive advantage by using AI due diligence in their M&A process.
Not only do AI due diligence tools automate tasks that would traditionally be carried out by a team of analysts, but they will also do so more accurately and quickly.
The Challenges of AI Due Diligence
However, AI due diligence is not a panacea and there are a number of challenges that businesses will need to be aware of when considering using AI.
While generally less subject to human bias, all AI can be subject to a certain amount of algorithmic bias. There are three main ways (pdf) this can happen:
- Input bias – Input bias is when a decision-making algorithm is trained with a biased dataset that is, for example, non-representative or lacks information.
- Training bias – Similarly, training bias can occur when data is mislabeled, or when patterns are inappropriately identified. For example, learning algorithms might assign causation to a correlation.
- Programming bias – human biases can be unwittingly engrained into the design of the algorithm and that bias can be exacerbated or perpetuated over time.
While it’s hard to eradicate all forms of bias, businesses can mitigate the risk by thoroughly vetting AI tools, and being aware of potential areas of bias when selecting datasets.
Another issue businesses will need to consider when using AI for due diligence is privacy. It’s important to ensure the data a business uses for its AI due diligence is collected and stored securely, as a breach of privacy could have serious consequences.
Check that the analytical tool you’re using complies with all relevant privacy and data protection regulations.
Lack of human judgement
AI can’t replicate the judgement and intuition of a human analyst. While AI may be able to process a large amount of data quickly and accurately, there’s still a need for humans to interpret that data in order to make decisions.
That’s why many who use AI still opt for a hybrid approach, combining AI tools with a human analyst who oversees the process and makes the final decision.
Many AI tools are limited in their ability to understand and process certain languages, which can be a significant obstacle if a business is dealing with a target company that’s based in a different part of the world. At Symanto, our technologies are available in 50+ languages, but this is by far the norm at this point in AI development and it might be something worth considering when choosing an AI tool for a particular task.
By knowing and understanding the challenges associated with AI you are better positioned to choose the best and most appropriate due diligence research tool for your business.
Here’s a rundown of a few of the key areas of use for AI due diligence.
Compliance and risk assessment
One of the most important elements of AI due diligence is compliance and risk assessment. By using AI to automate this task, businesses can quickly identify any potential risks associated with a target company. This includes financial risks, regulatory risks, and reputational risks.
In a highly competitive industry, it’s essential to have a clear understanding of your competitors. AI can be used to quickly gather and process information on your competitors, their strategies, their products, and their financials. This will give you a clear picture of the competitive landscape and allow you to make informed decisions about your own strategy.
At a time when the reputation of a company is more important than ever, it’s essential to assess the health of a target company’s brand before making an acquisition. AI can be used to quickly gather and process data on a target company’s social media presence, its customer sentiment, and media coverage.
This will give you a clear picture of the company’s reputation and allow you to make an informed decision about whether or not to proceed with the acquisition.
Introducing Symanto AI
Symanto is a leading provider of AI-powered tools, specialising in commercial due diligence . Our tools and services are designed to help businesses streamline their M&A process and make informed decisions about potential acquisitions. This is done by assessing brand health and conducting competitive analysis based on what customers and employees say about the target brand and its competitors.
Our world-leading NLP models bring you the most accurate and up-to-date insights into a target company. Using our AI-powered tools, we offer a full brand health and due diligence report with the option for insights from our data analysts to help you make the most of your data.
Get Started With Symanto
If you’re looking for a competitive advantage in your M&A process, get in touch to learn more about our services for fast, accurate and reliable AI due diligence.