Study: Early adopters seeing benefit of Gen AI in M&A

The use of generative AI (Gen AI) among M&A practitioners continues to grow at a relatively slow rate, but dealmakers are showing increasing appetite to incorporate the technology into their processes.

In a new Bain & Company survey of more than 300 M&A practitioners, 21 per cent of respondents say that they currently use Gen AI in M&A, up from 16 per cent in the previous study conducted last year.

Reflecting on the increase, Bain & Co say that they “expected higher growth” over the past year. A previous study from SaaS-based M&A technology provider Datasite highlighted significant concerns among dealmakers over the use of Gen AI, including a lack of regulation, data privacy and security, job displacement, quality control and intellectual property rights.

However, the new Bain & Co survey has found that those dealmakers that have already incorporated Gen AI are already beginning to set themselves apart from the pack. The study showed that 36 per cent of the “most active acquirers” were using Gen AI in their processes – indicating that the most successful dealmakers are already taking steps to improve their dealmaking. Private equity firms are particularly notable early adopters, with over 60 per cent using at least one Gen AI tool at some point in their dealmaking. The report also found that more than half of respondents are expected to incorporate Gen AI by 2027.

While uptake remains gradual, the survey highlights how those that fail to act soon risk being left behind by more AI-savvy competitors. Bain & Co asserts that the “performance gap between active acquirers and less frequent acquirers will widen as a result of generative AI usage and capabilities.”

They go onto predict that “companies that master the use of generative AI in M&A over the next five years will identify targets faster than their competitors, underwrite more deal value with confidence, execute diligence and integration activities more rapidly with fewer resources, and ultimately deliver higher M&A assisted total shareholder returns”.

Looking at the expected enhancements that Gen AI can deliver in M&A, 52 per cent said they could increase the sector screens they complete, 50 per cent say that could increase the number of targets they consider in a long list and 49 per cent say they could improve the effectiveness of their initial screening.

49 per cent also said that they could improve the quality of the “outside-in information” they gather and 48 per cent say that could decrease the time required to understand market trends. 41 per cent, meanwhile, feel they could decrease the time taken to develop transition service agreements (TSAs) and 38 per cent say they could decrease the time needed to develop an execution plan.

Bain & Co add that Gen AI could also help buyers to make the best-informed bids and know when to walk away from a deal, identify new ways to underwrite and realise value more quickly and reduce the manual efforts involved in deals – easing the load on employees and potentially improving staff performance and retention.

Respondents indicated that, currently, they were largely using Gen AI during the early stages of dealmaking, with tools enabling them to accelerate processes such as “sourcing, screening, and diligence”. However, some are also beginning to use Gen AI tools for integration, divestiture planning and program management, while others are planning to significantly widen their usage.

Bain & Co forecast that early adopters will be able to use Gen AI tools to draft integration workplans and TSAs in less than 20 per cent of the time previously required within the next 12 months - “allowing them to mobilize working teams faster with better initial information.”

This is expected to be followed by the use of Gen AI to mine specific company data to “help size realistic cost and revenue synergies and to craft value creation plans based on the prior performance of their acquisitions.” Ultimately, Bain & Co write that they expect that Gen AI will enable “every single step of the M&A process” within the next five years.

The report concludes that, while those who haven’t incorporated Gen AI into their processes aren’t being left behind yet, they should seek to begin adopting tools soon in order to become fluent and not miss out on transformative deals.


Find out more:
AI in M&A: How can buyers and sellers harness the technology?

Find out about the key cybersecurity considerations in M&A - including in relation to generative AI

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