Utilizing AI for Sourcing and Screening in Successful M&A Deals

In 2024, M&A dealmakers faced a mixed bag of challenges, according to Bain & Company’s latest report. While the market didn’t quite see the positive momentum expected in terms of interest rates, seller willingness to exit, and regulatory scrutiny, there were still some positive signs. Private equity deal value was up 29% year over year, venture capital’s up 30%, and corporate M&A on track to end the year 12% above 2023 levels. On a global scale, M&A deal volume was up 7% year over year, marking a reversal of a two-year decline.

The report also highlights that strategic deal valuations are historically low, staying well below public market valuations that hit all-time highs this year. This led investors to hold onto portfolio companies rather than face significant markdowns at exit. Both private equity and venture capital investors, as well as private and public companies with the option to hold, chose to wait it out due to the uncertain regulatory environment.

In response to these challenges, M&A practitioners have started to adopt generative AI in their dealmaking processes. Approximately one in five dealmakers used generative AI for M&A activities in 2024, up from 16% in 2023. Those who have used it reported benefits such as reducing manual effort, accelerating timelines, and cutting costs.

According to Suzanne Kumar, from Bain & Company’s M&A and divestitures practice, successful dealmakers this year excelled in adapting quickly to the market realities and enhancing their M&A capabilities by embracing new tools like generative AI. The use of AI not only streamlines the dealmaking process but also helps in sourcing, screening, and improving overall diligence.

Looking ahead, 16% of M&A practitioners plan to start using generative AI in the next 12 months, indicating a growing interest in leveraging this technology for more efficient and effective dealmaking. So, it seems like AI is becoming an increasingly popular tool for M&A professionals looking to stay competitive in the evolving landscape of mergers and acquisitions.