Merrill Corporation

Media Coverage

AI to transform grunt work for M&A professionals

6/25/2019

Artificial intelligence (AI) is likely to transform M&A professionals’ day-to-day activities, although grunt work undertaken by juniors will be more vulnerable than higher-level tasks at the beginning, experts said.

Although private equity (PE) take-up of AI is at a very early stage, the ability to recognize patterns that are not obvious to human beings will transform the market, Merrill Corp Chief Product Officer Thomas Fredell said. For example, learning algorithms will make it much easier to screen the market for buy-and-build candidates, he added.

The main saving will be for junior team members, one Madrid-based financial sponsorship banker said, adding that the process of looking for targets tends to be very time consuming.

Even so, once the targets have been identified, contacting owners and persuading them to sell will still be a time-consuming job requiring judgement, the banker said. Persuading the owners of non-distressed businesses to sell is more an art than a science, he added.

A lot of legaltech products that are hitting the market are based on AI, one London-based actuary said. However, PE firms that want to do deals in financial services, for example, will still need bespoke models for the time being, he said.

In the longer term, AI will completely transform the world of finance, the actuary and a London-based financial sponsorship banker said. Lawyers will be particularly vulnerable to the changes in the earliest phases, this banker said.

There is a lot of talk in the market about the changes that AI will bring, a Madrid-based lawyer said. Although the transformation will certainly be significant, relationship management and judgement calls are unlikely to be replaced, this lawyer said, adding that good legal advice always has an “artisanal” element.

The dawn of AI fits into a longer-running trend, the Madrid-based banker said. Twenty years ago, it used to take a couple of days to analyse peers, he said, adding that it can now be done almost immediately thanks to widespread data and global accounting standards. The lawyer agreed that AI will speed up existing trends towards faster processes.

It will probably take 20 years for the full impact of AI to become known on the world of M&A specifically and finance in general, the actuary said.

One simple example of the way that AI will eliminate tedious work is how it will allow PEs to black out personal information from a complex document, such as a sale document on a portfolio of bank mortgages, Fredell said. This will help with compliance on the EU General Data Protection Regulation (GDPR), he said.

Merrill Corp’s virtual dataroom (VDR) DatasiteOne recently launched a new AI-based tool that will allow administrators redact and un-redact documents. This development was flagged by M&ATech in May.

At the moment, there are a lot of startups using AI technology to tackle specific problems, Fredell said. The main gap is for platforms, which link together different tools and try and sell them to a specific audience, he said.

Being able to save time on administrative tasks will give a competitive advantage for PEs and advisers who work out how to implement the technology before their peers, Fredell said. The key to better performance will lie in being able to do basic research faster and with less effort, while gaining more powerful insights, he said.

M&ATech covers technology trends aimed at M&A professionals. If you would like to give us any feedback, please contact rupert.cocke@acuris.com.

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