ANALYSIS: Most M&A Attorneys Would Use AI for Due Diligence

Artificial intelligence (AI) has infiltrated almost every facet of daily life. For M&A lawyers, exposure to AI and machine learning tools likely comes from deals involving the buying and selling of AI companies as well as through the software the lawyers use on a daily basis.

Most deal lawyers who responded to a recent Bloomberg Law survey said that they’re open to using AI at some point in dealmaking.

But at exactly what stage in the dealmaking process would M&A lawyers consider using such tools? Most of the respondents (56%) to Bloomberg Law’s State of Practice survey said that they would use AI tools during the due diligence process. This is probably because AI has great potential to significantly cut the notoriously long hours associates spend on due diligence. AI may be applied at various points in the due diligence process, including preparing the due diligence checklist, investigating and verifying target company disclosures, and preparing the due diligence report at the end of the due diligence review.

Over 40% of the respondents said that they would consider using generative AI and machine learning tools to help draft M&A agreements. Contract drafting tools that incorporate AI offer significant time-saving benefits including:

• generating contract templates;
• providing standardized, consistent contract language; and
• streamlining the contract review process.

There are a couple of areas where deal lawyers are more hesitant to consider employing AI. Only 10% of the respondents would consider using machine learning tools for deal planning. This may be because deal planning entails a wide number of factors that may vary depending on industry, deal size, and deal type.

Finally, only 6% of the respondents said that they would consider using AI to negotiate M&A deals. This is probably because the majority of M&A practitioners that responded recognize negotiation as an art and as an essential deal making skill that should be preserved and developed rather than delegated to AI.

Despite the reticence in these two areas, M&A practitioners might want to consider the benefits of using AI. Recent AI tools tailored to the legal industry have begun to negotiate deals with little to no human contact. For instance, by learning company or industry policy, an AI tool could highlight contentious clauses and redraft those clauses in accordance with language in the company’s policy. And some aspects of the deal planning process such as corporate housekeeping could benefit from the use of AI.

Not on Board Yet

While most deal lawyers said that they would consider using generative AI or machine learning tools at some stage of the dealmaking process, 30% of the survey respondents said that they wouldn’t consider using it at any of the stages. This hesitation may be due to a lack of understanding about what the technology can do, but may also be because this group of attorneys may have decided that the inherent risks posed by generative AI outweigh the benefits.

Deal lawyers who do use AI software—as with any emerging technology—should be aware of the legal and ethical risks the tech may pose for dealmaking. For instance, attorneys shouldn’t enter third-party information into AI software to avoid violating confidential agreements associated with the deal.

As more lawyers are exposed to AI and become more comfortable with the technology, the number of attorneys who wouldn’t consider using the technology in the dealmaking process will likely shrink.

Bloomberg Law subscribers can find related content on our M&A Deal Analytics resource.

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