AI in Due Diligence
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Most of us who have gone through the tedious process of undertaking due diligence would agree that it is a painful but necessary exercise in M&A deals. According to research by Gartner in 2019, the average time to finalise a M&A deal has risen by more than 30% over the last decade due to increasing complexity in the deal-making environment, and growing scrutiny from governments, regulators and investors. There are now AI (Artificial Intelligence) technology than can be laid over data rooms to deliver intelligent, automated and rapid decision making (e.g. Luminance). Such AI technology analyses documents using supervised and unsupervised machine learning algorithms to understand the data and thereafter outputs key information and potential critical risks.
Have you experienced a deal where AI was used to assist with due diligence. If yes, did you think it was effective? If not, do you see AI playing a greater role in due diligence in the years to come?
Reading this four years later, AI has clearly become part of the Due Diligence process. Beyond specialist platforms like Luminance, many teams now use ChatGPT or Claude to review documents, analyse Excel files, summarise findings and prepare follow-up questions. They don’t replace expert judgment, but they can significantly speed up the initial review. The biggest challenge now is ensuring data security and confidentiality when handling sensitive transaction information.
I find it extremely challenging to trust due diligence reports for accuracy when they’ve been put through an AI platform. Especially as the write ups have become longer and less targeted.
We are currently using AI as part of our evaluation of a acquisition opportunity, and I’ve found it to be a valuable “thought partner” or tool throughout the due diligence process. It has helped us organize information, identify potential risks, compare strategic alternatives, challenge assumptions, and think through governance and valuation questions. That said, I don’t see AI replacing experience or judgment. Due diligence still requires asking the right questions, interpreting the answers, and understanding the nuances of the business (most importantly – people). I believe AI will continue to accelerate the analytical side of M&A, allowing deal teams to spend more time on strategic decision-making rather than gathering and organizing information.
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