How AI Will Take Over M&A Due Diligence

AI is on everybody’s mind these days… the topic du jour.

You’ve no doubt seen how this technology will revolutionize how people live, work, communicate… Really there is no area where AI will not touch – if it doesn’t already.

That extends to the world of M&A, specifically the due diligence process.

Basically, the number of M&A transactions is ever-increasing. And with deals getting more and more complex, every step of the way towards getting those deals done is increasing in complexity too.

Take deal structures. In the past, a Seller would have an asking price for their company. After some negotiation with the Buyer, the final price would be worked out. Then the Buyer would pay that amount in cash… take ownership… deal is done.

Not so much anymore.

Buyers now say that, because of Covid and other uncertainties in the market, there was a period where valuations were very high. They feel that everybody was overpaying – and doing so eagerly.

But now that things have settled down. And between restrictions on lenders, the cost of finance, and other factors, many Buyers are saying to Sellers: “I’d love to buy you for $100M… if you’re worth $100M – which I don’t know yet. Can we figure out a way for me to pay you $60M now? Then, when we know more and you hit certain milestone post-closing, you’ll get your other $40M?”

Basically, Buyers are using all sort of structures in deals right now. Seller financing, earn-outs, incentive payments…

In other words, Buyers are seeking to hedge right now and are getting their way because, while it was a Seller’s market during and right after Covid, it’s now more of a Buyer’s market.

It’s important to note that Buyers are not doing all this to take advantage of anybody. They’re just trying to find ways to make the deals work in this current climate.

Making Due Diligence Simple Again

Complexity is also certainly a factor when it comes to due diligence. There is more of it and conducting due diligence is getting more and more complicated.

As you know, due diligence already requires pouring over massive amounts of data. And it’s hard enough for people to wade through it all as it is in a timely manner. Going forward, that task will only get harder if we stick with the old way of doing things.

That’s where AI comes in.

If AI is exceptionally good at taking all that data, interpreting and organizing it, so that the heavy lifting is done before a human has to touch it.

In short, AI tools should make the M&A due diligence process smoother, faster, and cheaper.

This is already happening.

In the near future, look for vendors, with M&A knowledge and experience, ready to import your deal’s due diligence data and then slice and dice it to get the answers you need – including any anomalies you need to examine more closely.

This is an evolving topic, and a conversation I expect to continue as M&A becomes more and more complex, and AI is the only tool equipped to keep up.

I’m happy to chat about this topic with you, as well as provide information on innovative transactional insurance options for covering M&A deals. That’s another area in the industry marked by major changes in recent years. Please contact me, Patrick Stroth, at



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