The Rising Role of Artificial Intelligence in Mergers and Acquisitions
US News hailed 2018 as a record-breaking year for merger and acquisition (M&A) activity as companies around the world announced deals worth a total of $3.3 trillion in just the first three quarters of the year. American companies make up a large portion of the pie with over $1.3 trillion worth of deals — that’s more than 40% of all global M&A activity. It’s definitely an improvement from 2017, when The Exit Firm noted that merger activity dipped by 15%.
Among those numbers are tech giants racing to acquire artificial intelligence (AI) startups, with Google and Apple having the most AI acquisitions to date. In fact, Google now has 14 acquisitions, while Apple has closed 13. Not to be forgotten, of course, are other global leaders like Facebook and Amazon, which are also working to keep up. These deals are all due to the massive growth potential of AI technology, which makes for great opportunities for bigger companies to increase their market share and improve their business model. In fact, Gartner’s prediction for AI’s business value is set at $3.9 trillion in the next few years, thanks to its ability to innovate in customer experience, data science, and other algorithm-based applications.
All in all, AI is already responsible for several business innovations today. Ayima acknowledges how AI is now part of everyday life, as it recommends music on Spotify, pulls up the best Google search results, responds to users’ voice commands, and much more. On a larger scale, AI is used by banks to detect fraud, by financial advisors to predict stock movements, and even by farmers to separate vegetables. And while AI companies have been a popular choice for acquisitions by global giants, the technology itself has the potential to streamline the M&A process.
Part of the process involves due diligence reviews when dealing with numerous contracts at once. For the uninitiated, due diligence reviews are necessary because they allow companies to assess financial aspects and determine what the benefits, risks, liabilities, and opportunities are for M&As. However, the process can be time-consuming and also expensive. A statistic mentioned on Raconteur details how 50% of UK-based deal makers desired to close more deals than they actually did, admitting that due diligence was what had delayed their transactions. With AI technology, however, these tasks can be speeded up. Algorithms can be trained to recognise legal concepts, contain costs, and reduce risks by spotting any discrepancies.
Moreover, as two companies merge, employees from both organisations would have to adapt to the new business structure. AI can be used here to accelerate the training of new staff. Through virtual assistants, employees have constant guides available throughout the acquisitions process, leaving human supervisors free to focus on other priorities during the merger.
These same assistants can also be responsible for boosting motivation within the workforce by projecting the simplicity of the acquisitions process. For instance, while a merger spells an overhaul in business structure, employees can get through the changes by following the steps simplified by AI bots. One example of this is an AI solution called RiseSmart, which can provide on-demand tracking and reporting plus data analysis in order for companies to understand which departments are successfully employing internal talent and which ones need more encouragement to improve workplace culture. It can also match internal job leads with transitioning employees to help eliminate the guesswork of moving talent within an organisation.
The benefits of AI in M&As may be encouraging for businesses looking to strike a deal with others. Developments in AI technology are progressing at a rapid pace, and soon, its use will be commonplace in mergers and acquisitions, and companies could save more time in adjusting and focus on other business matters.