In the complex world of mergers and acquisitions (M&A), the post-close integration (PCI) phase determines the ultimate success or failure of the deal. While the strategic rationale for a merger might be sound, the practical challenges of blending disparate corporate cultures, systems, and processes can quickly erode anticipated value. These challenges are not new; what is (somewhat) new is that artificial intelligence (AI) and machine learning (ML) are here to help.

Companies that embrace AI and automation technologies during the PCI phase gain a significant competitive edge. Research shows companies that leverage AI in M&A can achieve significant reductions in integration costs and substantially accelerate integration timelines [1]. By streamlining operations, minimizing risks, and maximizing synergies, AI-powered PCI strategies enable companies to achieve faster, more efficient integration, ultimately driving long-term growth and profitability.

“64% of M&A executives are confident that generative AI will drive transformation of the deal making process.” [2]

Institutions like JPMorgan Chase have proactively integrated AI technologies to streamline operations, improve customer experiences, and enhance risk management after mergers.

Streamline Due Diligence and Deliver Real-Time Insights

Due diligence, a critical stage in M&A, is a complex process that often involves sifting through mountains of documents and data. By automating data analysis, AI-powered solutions can expedite this process. They can extract and analyze information with remarkable speed and accuracy, to provide insights into financial, operational, and legal aspects of potential mergers or acquisitions [3].

JPMorgan Chase, for example, has developed an AI tool, COIN (Contract Intelligence), which can review 12,000 commercial credit agreements in seconds—a task that previously consumed thousands of hours for legal teams. This saves time, reduces human error, and supports a thorough due diligence process [4].

Similarly, Kira Systems, an AI-powered contract analysis platform, boasts a 90% reduction in document review time during due diligence. This acceleration allows deal teams to identify potential risks and opportunities much faster, enabling quicker decision-making and a more efficient M&A process [5].

“94% of contracting leaders say that generative AI will help them analyze risk and compliance in contracts [6].”

As the Boston Consulting Group (BCG) emphasizes, technology plays a central role in PCI. By aligning business and technology functions early in the process, companies can leverage AI to gain a comprehensive understanding of the target company's operations, financials, and risks in a fraction of the time traditional methods require [7].

Enhance Decision-Making using AI's Predictive Power

AI's predictive capabilities are transforming M&A decision-making. AI algorithms analyze vast datasets and identify patterns, correlations, and potential risks that human analysts may miss. This analysis leads to better-informed and strategic decisions.

“With AI's predictive analytics, forecasting market trends and company performance is like having a crystal ball. By analyzing historical data and current market conditions, AI can predict future opportunities, helping investment bankers to make more informed decisions [8].”

For example, System1, a company that operates an acquisition marketing platform, utilizes an AI tool called AlphaSense to quickly extract key insights from earnings calls and other financial reports, saving them time and resources compared to manual analysis. This real-time access to information helps them better understand industry trends and competitor performance [9].

Companies are also increasingly using AI-powered tools to assess the compatibility of corporate cultures, a critical factor in the success of any merger. By analyzing employee data, communication patterns, and social networks, AI can predict potential cultural clashes, positioning companies to proactively develop strategies that foster a cohesive and productive work environment.

Take HRBrain.ai's Culture Assessment tool for example. This AI-driven tool analyzes employee surveys, social media interactions, and other data sources to identify potential cultural clashes and integration challenges before, during, and after a merger [10]. Pymetrics is a platform that uses neuroscience-based games to assess personality traits and cultural fit for potential hires [11]. This data could be extrapolated to analyze the cultural compatibility of two merging companies.

Furthermore, AI-driven scenario modeling allows companies to simulate various integration scenarios, evaluate potential outcomes, and make data-driven decisions. This approach reduces the risk of costly missteps and ensures that the integration process aligns with the overall strategic objectives of the merger.

Automate Repetitive, Time-Consuming Tasks

PCI can burden employees with a deluge of repetitive, time-consuming tasks that can strain resources and divert attention from strategic priorities. AI is changing the game by automating these mundane activities, freeing employees to focus on higher-value contributions.

It is true that employee’s brain-power suffers when they are constantly switching between tasks. “When employees are bogged down checking manual processes off their to-do lists, they feel little energy for strategic thinking” [12]. Using generative AI to automate these mundane tasks can free up that employee brain-power. For example, Gen AI can be used in the automation of the accounts payable, marketing, and customer service processes, to name a few.  

Companies like AccountsIQ and Hypatos provide automated accounts payable AI software that are saving companies time by providing faster resolution cycles, improved financial planning, reduced errors, and improved compliance [13].

Customer service chatbots, like those provided by Zendesk and Tidio, can be used to automate a number of mundane tasks including appointment scheduling, order tracking, return processing, and more (see the image below). 

Deloitte's 2023 M&A Trends report emphasizes the benefits of AI-driven automation in PCI [14]. The report highlights how AI-powered tools are revolutionizing PCI by automating a wide array of tasks, from employee onboarding and data migration to system integration. This automation not only accelerates the integration process but also fosters a more engaged and empowered workforce, as it frees employees from tedious tasks, allowing them to focus on strategic initiatives and building relationships within the newly merged organization.

Overcome AI Challenges and Embrace the Future

While the AI advantage is clear, challenges remain. Companies must address data availability, implementation costs, and the need for skilled AI talent. However, the potential rewards outweigh the risks.

By strategically implementing AI, prioritizing data quality and security, and investing in AI training and upskilling programs, companies can overcome these challenges and unlock AI's full potential in M&A.

The future of PCI is undoubtedly AI-driven. Companies that embrace this transformative technology will position themselves for success in the evolving business landscape. By leveraging AI's ability to analyze data, predict outcomes, and automate tasks, businesses can achieve faster, more efficient, and ultimately more successful mergers and acquisitions. The AI advantage isn't just about technology, it's about empowering human talent, minimizing risks, and maximizing the value created through strategic partnerships.

About us: mXa, on the 20+ year foundation of Method360, was founded to intentionally serve fast-growth companies and the unique challenges they face. We understand that inorganic and organic growth provokes change, ambiguity, and uncertainty that can deeply burden the organizations involved. By seeking to understand the human element in M&A and fast growth environments, mXa embraces a unique, contrarian approach in advising clients that seeks to realize maximum value for them in alignment with business objectives.

Interested in learning more about our capabilities or discussing your M&A or AI story? We’re here to help.

Sources:

[1] https://www.mckinsey.com/capabilities/m-and-a/our-insights/gen-ai-opportunities-in-m-and-a

[2] https://www.ansarada.com/blog/deals-powered-by-ai

[3] https://imaa-institute.org/blog/ai-for-due-diligence/

[4] An AI Completed 360,000 Hours of Finance Work in Just Seconds (futurism.com)

[5] 2024 CLM Trends Mid-Year Report: State of CLM and AI-Powered Contracting | Icertis

[6] AI in Contracting from Untapped Revolution to Emerging Evolution

[7] Strategic Initiative Management: The PMO Imperative (bcg.com)

[8] https://www.ansarada.com/blog/deals-powered-by-ai

[9] https://www.alpha-sense.com/case-studies/system1/

[10] https://hrbrain.ai/culturetool/

[11] https://caseinterview.com/pymetrics

[12] How Modern AI-Enabled Automation Unlocks Full Human Potential (forbes.com)

[13] 10 AI Applications in Accounts Payable (AP) Processes for 2024 (aimultiple.com)

[14] Deloitte 2023 M&A Trends