How artificial intelligence is changing the mergers and acquisitions process

Artificial intelligence is revolutionizing the way lawyers approach due diligence, saving clients money, accelerating the review process and creating budget security.

“For a long time, AI was an alternative to the traditional approach of manually checking documents during an M&A transaction,” says W. Dane Fennell, associate in the Corporate & Commercial Group at Babst Calland. “But now customers expect more and more efficient, more accurate and faster diligence results. To deliver, AI has become a critical tool in the due diligence process for businesses of all sizes. “

Smart Business spoke to Fennell and Christian A. Farmakis, shareholders and CEO of Babst Calland, about how AI is changing due diligence in the legal market.

What are the benefits of implementing AI in due diligence?

The amount of data available is growing exponentially, which puts pressure on the leaders of the M&A team. Just a few years ago, lawyers had months to work on a due diligence project, searching through thousands of documents to collect and analyze data. The review period has been cut dramatically as both buyers and sellers are pushing to close deals faster.

A few years ago we supported an acquisition that required three months of pre-closing diligence and 18 months of post-closing confirmatory diligence. On a similar project earlier this year, we did the same work and reviewed the same number of documents in three weeks. Our AI tools enabled us to deliver cheaper, more accurate results in weeks instead of months, often at a fraction of the cost of a manual review.

Today’s buyers need a better understanding of the “game changing” topics that will guide their deal making decisions. With AI, we can isolate “high quality” problems from a large amount of raw data earlier in the diligence process.

As the transaction process progresses to completion, we can determine the relevant operational, legal, and financial terms related to the transaction structure, eliminating the need to review every letter of every document in the data room.

How can the use of AI create budget security for customers?

By using AI, a law firm has the ability to aggregate key figures on previously completed projects that are similar in size, scope and complexity and have comparable delivery windows. This enables a law firm to make business decisions about the size of the team required on the project, as well as the total number of hours required to complete it. All of this helps give the customer a more accurate estimate of the expected cost of their due diligence.

Will AI eliminate the role of lawyers in the due diligence process?

With machines doing the work that used to be done manually by groups of contract lawyers, there is a fear that lawyers will become unemployed in the near future. But that is not the case. The process has a very important human component that is not going to go away anytime soon.

Due diligence still requires human interpretation and the gut instinct of experienced lawyers. All diligence projects will continue to require legal experience combined with deal experience to determine the type of AI tool to use and to implement the AI ​​to best achieve the desired results for a client.

AI helps speed the process and reduce costs, but the human component far outweighs a computer; this human intervention is required to ensure absolute security in reporting the results of the due diligence. AI can be a fantastic tool for those who accept it and understand both its merits and its shortcomings.

Insights into legal matters is presented to you by Babst Calland.