Artificial intelligence (AI) and cognitive computing provide excellent opportunities for investment firms, consultants and companies looking to acquire or be acquired. A business application with the ability to reason through data and establish the relationships that connect data sets is a great due diligence resource for companies looking to grow through acquisition.
The speed at which humans are able to gather, process and present critical data related to the viability of a successful transaction is a snail’s pace compared to the speed of systems like:
These systems provide real value for companies that are looking to consolidate faster, with less risk, after identifying all of the potential “gotchas” that can derail a transaction in due diligence.
Accelerated Deals, Lower Costs and Reduced Risk
It’s fitting there is such a frenzy of acquisitions in the AI technology space, as companies vie for intellectual capital and talent. Open Text’s acquisition of Recommind, an eDiscovery software company, which facilitates eDiscovery. Recommind has partnered with many law firms and High Speed Research (HSR) and cuts the time and overhead involved with culling hidden obstacles to M&A.
The speed at which analytics engines can parse through contracts and other data is much faster than teams of junior attorneys, and often provides better accuracy. The legal cost of M&A deals is often as much as thirty percent of the total billing.
Gathering potentially problematic contract terms can bring negotiating companies to the bargaining table faster, and if terms cannot be agreed on, both sides can move on to other deals. Cognitive systems can process thousands, or tens of thousands of contracts very quickly, and identify potential liabilities of two corporate entities becoming one.
Avoiding Disastrous Acquisitions
There have been some bad acquisitions made by companies that rushed due diligence in hopes of gaining or diversifying market share. In many cases, the due diligence process is considered painful, frustrating or even a risk to getting a deal done. These emotions can cause missed liabilities and set the stage for a complicated integration process post-merger.
Aside from making due diligence faster, and reducing the people required for the process, Artificial Intelligence takes the emotions out of the process, and any biases which influence the process. When buyers and sellers collaborate, and are willing to step up to complete transparency during an acquisition by adopting AI, they avoid risk and can discover new opportunities.
Some of the areas of which should be of close scrutiny by cognitive systems include:
- Human resources
- Product research and development or engineering
- Sales and marketing
- Asset management
- Real estate and operations
Large consulting and accounting firms like Deloitte and KPMG have put AI systems to work in many of their M&A advisory engagements. Canada’s Chemtrade adopted Kira’s Diligence Engine along with their law firm, Osler, Hoskin & Harcourt in a $900 million acquisition of General Chemicals. They were able to accelerate the due diligence process, and minimize business disruption across both companies as they unified.
A Canadian investment firm used another AI application called The Brain from Toronto’s Outside IQ. They were preparing to merge with Sino-Forest, but were able to leverage The Brain to uncover asset reporting discrepancies which were missed by the RCMP, the Ontario Securities Commission and TSX regulators.
The ROI of AI and M&A
Companies that use AI systems for mergers and acquisitions can reduce due diligence by thirty to ninety percent. They can reduce the time attorneys need review contracts by over ninety-five percent. If a transaction is of an international nature, or requires review of multiple languages, cognitive systems can add great value there is well. It’s hard to put a dollar value on risk mitigation. opportunity discovery, and ensuring contractual obligations are met post-merger.
There are many innovations in technology which are changing the roles of business analysts, attorneys and other white collar workers working on mergers and acquisitions. Analyzing, securing, controlling and collaborating on documents relating to corporate deals is evolving rapidly.