The future of M&A: embracing tech to stay ahead

As deals become more complex, fast-paced, and competitive, dealmakers need to adopt a strategic vision for utilizing technology to stay ahead. Tech Stack - a suite of tools designed to streamline every aspect of dealmaking - is poised to revolutionize how transactions are executed. Those who set a clear vision for how to integrate this technology into their processes will find themselves better positioned than competitors, closing deals faster, more accurately, and at a lower cost.

The recent Data & AI Dealmaking Roundtable in Birmingham provided a glimpse into this future. The insights shared by industry leaders, from the Birmingham dealmakers community and Insider Media, made it clear: AI will reshape M&A, making deals faster, smarter, and more efficient. Key takeaways from the event underscore the importance of adopting a tech vision to remain competitive in the ever-evolving M&A space.

The strategic importance of a tech vision

In the future of M&A, having the right technology stack - what we call a "tech blanket" - will be crucial for dealmakers who want to excel. However, before building that stack, it's essential to set a clear vision. A well-thought-out vision for how technology can enhance the deal processes ensures that the tools dealmakers choose will help them meet their goals, whether it's faster execution, lower costs, or higher deal volume. Without this vision, firms risk falling behind, using outdated methods while competitors leverage cutting-edge technologies to get ahead.

A competitive advantage for investors and mid-market M&A

For private equity and mid-market M&A players, embracing technology offers a unique competitive advantage. AI-enabled tools allow firms to move quickly, act on the best opportunities, and significantly reduce the costs of due diligence and financial modeling. By incorporating AI into their tech stack, mid-market players can execute deals at a level previously reserved for larger firms with deeper pockets. This leveling of the playing field will open new doors for mid-market M&A, making it more dynamic and competitive.

Building the tech stack and its applications in M&A

Let's explore how tech is shaping different aspects of M&A, highlighting the importance of including these tools in a strategic vision:

1. Deal sourcing with predictive analytics
   In the initial stages of dealmaking, deal sourcing can be a game-changer. With AI and predictive analytics, dealmakers can identify potential deals that are most likely to succeed. This is especially beneficial for corporate finance teams, who can assess which mandates to pursue from both the buy and sell sides. Investors, particularly private equity firms, will also gain from AI's ability to sift through numerous information memoranda, helping them select the best investments to act on.
2. Due diligence and automated reports
   The labor-intensive process of due diligence is set to undergo a major transformation. With AI, due diligence can be almost fully automated, reducing the need for extensive human resources and cutting costs. This is expected to be a significant differentiator in the mid-market, where firms often operate with limited resources. The ability to generate due diligence reports quickly, and with less manpower, will allow mid-market dealmakers to compete more effectively with larger firms.
3. Valuation and financial modeling
   AI-driven tools will streamline the valuation and financial modeling process, providing real-time analysis and forecasting. Dealmakers will be able to evaluate financial models instantly, with AI identifying key risks, opportunities, and synergies that may not be immediately apparent. This will allow for more precise valuations, enabling faster decision-making and negotiations.
4. Risk management
   The ability to assess and manage risk will become more sophisticated with AI. Through continuous monitoring of external factors such as market conditions, regulatory changes, and competitive dynamics, AI tools will provide dealmakers with real-time risk assessments. Predictive analytics will allow dealmakers to anticipate challenges, adjust strategies, and execute deals with greater confidence.
5. Performance monitoring
   Post-deal performance tracking will also be enhanced by AI. Once the deal closes, AI tools can monitor key performance indicators, ensuring that the anticipated synergies and goals are met. This performance monitoring allows for early intervention if things deviate from the expected course, helping companies protect their investments and maximize value. 

AI enhances, not replaces, the human element

One of the most important points highlighted during the Birmingham roundtable was that AI won’t replace human advisors, but rather enhance their ability to deliver better outcomes for clients. Dealmakers will still rely on their human expertise, but AI will take over the repetitive, time-consuming tasks, allowing advisors to focus on higher-level strategy and relationship-building. AI-powered platforms will provide a more transparent and smoother deal process, creating an enhanced client experience that fosters trust and confidence.

Read more about AI in M&A in the blog AI, beyond the hype, written by Oscar van Tol, CTO of Virtual Vaults.

Experience the future with Virtual Vaults

As the M&A landscape evolves, the importance of leveraging the future of technology cannot be overstated. Virtual Vaults is at the forefront of innovation, shaping the future of M&A with advanced solutions designed to help dealmakers succeed in a fast-paced, competitive landscape.

Do you want to know how Virtual Vaults continues to push the boundaries of Dealtech, helping you close deals smarter, faster, and with greater confidence? Contact us and we will show you.

This article was originally published on Insider Media on 16th September 2024.