2024 Should See AI Flex It’s M&A Muscles

Forget about the merger and acquisition deals featuring AI companies. How about using artificial intelligence to streamline those deals?

There’s been a fair amount of buzz about AI-oriented mergers and acquisitions heading into the new year where M&A activity should be on the rise, as inflation and talk of a U.S. recession abate.

“All that put together to me means that there’s going to be more deals in the next 12 to 24 months than what we’ve seen in the last 12 months,” Daniel Friedman, global leader of the transactions and integrations practice at Boston Consulting Group, a Boston-headquartered management consulting firm, told CFO Dive this week.

While M&A trackers seem upbeat about 2024, nobody’s popping champagne corks just yet.

We’re relatively optimistic about the outlook for 2024, as deal activity shows promising signs of recovery,” notes Jens Kengelbach, Boston Consulting Group’s global head of M&A. “That said, challenges for dealmakers remain—in particular, a higher cost of capital, which will push companies to consider large or transformational deals with an even higher level of scrutiny. This could mean pursuing acquisitions, divestitures, and sometimes a combination of the two in order to bolster growth and reshape businesses.”

AI Is Already Reshaping the M&A Market in ‘24

According to a recent report from the Boston Consulting Group, M&A activity has been down of late. Through August 2023, companies had announced approximately 21,500 deals year-to-date, with a total value of $1.18 trillion,” CCG reported. “Deal volume fell by 14% compared with the same period in 2022, and deal value plummeted by a staggering 41%.”

This year should be different, as artificial intelligence immerses itself more deeply in the corporate finance realm.

“Artificial intelligence (AI) promises a new age of transformation like never before, with new business models, improved efficiency and productivity across several sectors, BCG notes. “More executives than ever discussed AI in earnings calls in 2023, following projections that the AI market size will reach $407 billion by 2027.”

In 2024, AI will continue to take center stage, not only influencing M&A deals but also transforming the way they are managed, BCG says.

“AI has already made significant strides in streamlining business operations, identifying potential M&A targets, and automating various tasks associated with deal processes, the group reports. “Global dealmakers identified increased productivity, especially through generative AI (GenAI), as its primary benefit.”

GenAI alone has the potential to boost M&A processes by up to 50%, BCG states. Especially eye-opening is how cognitive AI applications are aiding dealmakers “in efficiently identifying and targeting potential deals by analyzing anonymized private equity and other transaction activities.”

This is not to say it’s all green lights for artificial intelligence applications in the M&A space, and that goes for 2024 and beyond.

“Concerns around privacy, intellectual property rights, security, and data quality persist, with most dealmakers favoring government regulation of AI,” the BCG report states.

Even so, it’s hard for corporate finance leaders not to be encouraged about how AI may ultimately influence M&A activity going forward.

“It stands to reason that companies are going to try to figure out how to add it to their portfolio of operations,” said David Dean, managing director of global M&A at WTW, in comments to CFO Dive. “I think there’s growing interest in understanding what AI can do to make delivery of M&A services more efficient.”

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