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Merrill Corporation

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M&A Due Diligence: Clients vs Advisers

By Suzy Bibko, EMEA Content Marketing Manager, Merrill Corporation

Due diligence compliance has always been an issue in M&A, but do corporates and private equity firms have different concerns than lawyers and bankers? The answer is yes…except when it comes the role of technology in the future.

The Differences are Clear
We polled 500+ professionals involved in M&A transactions across EMEA to find out, and the results were interesting. While client and adviser thinking was aligned in many areas, there were differences:

  • Advisers think the risk of a data breach in the due diligence process has decreased in the past five years, while clients think it has increased;
Horizontal bar chart of clients' and advisors' thoughts on due diligence risks over the past five years. About the same leads, followed closely by slight increase and slight decrease
  • Clients feel GDPR compliance concerns have affected the progress of more transactions than do advisers;
Horizontal bar chart of nearly even yes and no's to whether concerns about a company's data privacy have affected M&A transactions
  • Clients believe AI and machine learning will transform due diligence over the long term more than advisers.
Horizontal bar chart of which technologies are seen as having the most potential impact on M&A transactions, with machine learning followed closely by analytics

The Future is Technology
Of course, these results can be interpreted in different ways. And the one thing that really stood out is the role of technology in the future for clients and advisers. Both groups of practitioners believe that AI, machine learning and data analytics could solve some of their biggest challenges in due diligence.

Moreover, according to results from our Merrill Insight webinar, The Future of Due Diligence, continued preparedness and more advanced technology were both the second-most cited reason for driving change in due diligence.

This all sounds like a positive step forward, but are M&A practitioners actually preparing for these changes and embracing technology for good in due diligence? It certainly seems so.

Our case studies found that firms are indeed ‘walking the walk’. Baker McKenzie says they are on a technological journey in terms of due diligence, using virtual data rooms to be more efficient and AI software for contract review, with the plan to more heavily rely on AI and other technologies for the more commoditised aspects of due diligence.

“Where there is the technology to review documents with a degree of accuracy we should absolutely be embracing that, with lawyers providing the more strategic input and supporting clients to make judgements on risk. We want to ensure that lawyer time can be used more effectively and efficiently for our clients.”
Jannan Crozier, Partner, Baker McKenzie

And Janis Dzenis of Luminor, the third-largest bank and financial services provides in the Baltic region, agrees new technologies such as AI and data analytics can further enhance the due diligence process, potentially automating specific areas. “I see no reason why we couldn’t do partial automation of due diligence development via data analytics and visualisation. AI has the potential to provide scenario analysis such that professionals would ‘just’ have to make the final decision.”