Technology Is Transforming Dealmaking Due Diligence

Dealmakers know all too well that due diligence is a crucial step during mergers and acquisitions (M&A) and strategic financing transactions. Dealmaking has evolved from paper-based manual processes of the past to teams utilizing transformative digital tools to streamline the process.

As digital tools like virtual data rooms (VDRs) and workflow software have replaced manual, error-prone processes, they’ve become key to speeding up deals by allowing virtual collaboration, reducing risk and helping buyers make informed decisions. VDRs ensure sensitive documents remain secure and easy to share while teams can seamlessly collaborate across a multitude of locations. VDRs are the single source of truth, ensuring that all parties are working from the same set of documents and data.

Current VDRs and workflow software tools are only the beginning. Technologies like artificial intelligence (AI) and machine learning are offering new opportunities for further digital transformation and added VDR functionalities, opening a conversation for dealmakers about what to expect next in dealmaking technology.

In this blog, we outline key points from our comprehensive new white paper produced with Reuters, Transformation in Dealmaking: Unlocking the Power of Digital Due Diligence, which includes insights from leaders at Volvo Cars, food producer Mars, Inc. and steelmaker ArcelorMittal.

The evolving role of AI

Although dealmakers have been cautious and gradual in adopting AI, especially when dealing with sensitive information, its potential to elevate due diligence is impressive. AI can improve efficiency and minimize errors in tedious processes such as redaction. While it hasn't been fully integrated into all due diligence operations, the technology proves valuable for risk management and data sourcing, showing promise in expediting processes that require the evaluation of large volumes of data. Additionally, AI can monitor deal pipelines and enhance information scraping for reputation analysis.

Some dealmakers have expressed concerns about data transparency and security with AI, especially around handling sensitive and confidential dealmaking information that would be detrimental to a deal. With the awareness that AI is in the early stage in most organizations, it’s ideal to seek out trusted technology partners who can allay any worries with a solid reputation and security.

All of this suggests significant potential for AI's role in dealmaking operations and strategic decision-making.

Cybersecurity risk mitigation

Cyber risks are a concern in all areas of business, especially dealmaking. Since the announcement of a deal can elevate the threat of a cyberattack, organizations are prioritizing data security. For a deal team in the middle of negotiating a transaction, a data breach can negatively impact a deal or end a limited partner’s interest causing severe repercussions to a firm’s overall reputation.

For these reasons, cybersecurity assessments are now a routine part of the investment process, influencing not only the due diligence but also the success or valuation of a deal due to a tarnished reputation and high-risk status. The results of a comprehensive assessment can have significant implications, such as adjustments in the purchase price, highlighting cybersecurity’s key role in business transactions when gaps are found that pose implied future risks, or a breach reveals current security weaknesses. 

Technology is transforming due diligence

Digital due diligence has revolutionized dealmaking, making it more efficient, cost-effective and less resource-intensive. Digital tools, along with AI, are indispensable in modern dealmaking, shaping not only the present but also the future of strategic financing and M&A.

To learn more about how technology is changing due diligence in dealmaking, read the complete report: Trransformation in Dealmaking: Unlocking the Power of Digital Due Diligence.