The Impact of Artificial Intelligence on Mergers and Acquisitions
Artificial Intelligence (AI) is transforming the landscape of mergers and acquisitions (M&A), optimizing efficiency and accuracy while redefining the process of identifying and executing deals. Throughout every phase of the deal process, AI plays a vital role, particularly in target identification, due diligence, and data analysis.
In the realm of M&A, pinpointing the right acquisition targets is essential. The M&A marketplace is filled with numerous valuable opportunities, but the ideal partners, sellers, or acquisition targets may not be immediately obvious. It requires sifting through vast amounts of information and distilling it into a strategic and holistic target list. While M&A professionals are adept at this intricate process, the competitive nature of the industry necessitates tools that can analyze data rapidly. AI improves traditional deal scanning by expanding the analysis to encompass both structured data (such as numbers and lists) and unstructured data (like disorganized text), resulting in deeper insights and unveiling high-value opportunities that align with strategic, financial, and cultural criteria. By combining the expertise of M&A professionals with AI capabilities, teams can make swift, confident decisions, gaining a competitive edge.
AI proves to be a valuable asset during the due diligence phase of M&A deals as well, simplifying document review and data room management. Some data room providers now integrate advanced AI features into their platforms, significantly streamlining due diligence processes. These tools automate repetitive tasks, identify potential risks, and extract meaningful insights from extensive sets of documents.
While AI holds immense potential in M&A, integrating it comes with certain risks. Efficiency alone does not promise superior deal outcomes. To fully harness its benefits, individuals and organizations must utilize the time saved for activities that add value and enhance decision-making. Additionally, AI cannot entirely replace human judgment; M&A advisers must discern when to apply AI and when human expertise is indispensable. Establishing clear guidelines for AI usage, including safeguards to protect confidentiality and prevent bias, is crucial for mitigating risks effectively. With careful planning and comprehensive protocols, AI can drastically enhance the efficiency and accuracy of the M&A process.
The incorporation of AI in M&A workflows marks a significant shift in how deals are sourced and executed. By improving target identification, streamlining due diligence, and enhancing data analysis, AI empowers firms to navigate the complexities of M&A more effectively, allowing transaction advisers to save time and focus on optimizing deal outcomes.
In December 2024, U.S. deal volume experienced a modest decline of 12.7% compared to the same period in 2023. Despite this dip, M&A activity is projected to rise due to stable financing, diminished recession risks, and heightened strategic needs. Federal Reserve rate cuts are expected to decrease capital costs, bolster confidence, and support the M&A market by making investments more appealing.
Pittsburgh’s M&A market witnessed steady deal volume in December 2024, with notable transactions completed by strategic acquirers and private equity firms. Companies like Westinghouse Air Brake Technologies Corporation and Sharp Therapeutics Corp. concluded strategic acquisitions, while private equity firm Riverarch Equity Partners acquired Metal Supermarkets IP, Inc.
In the Deal of the Month for December 30, 2024, Bloom Engineering Company acquired Wabtec, a freight, rail, and transit company based in Pittsburgh, PA. This acquisition is anticipated to enhance Wabtec’s energy solutions portfolio, gear transfer technologies, and reinforce its capacity to provide sustainable and efficient industrial systems. Bloom Engineering will join Wabtec’s Freight and Industrial Components Group, introducing its advanced burner and combustion technologies to Wabtec’s portfolio and driving growth in this critical market segment.
