AI in M&A: Is It a Game-Changer or a Dangerous Shortcut?

AI is quickly becoming a go-to tool in the world of mergers and acquisitions (M&A). It promises faster decisions, sharper insights, and a clearer path to closing deals. But is it really making M&A smarter? Or is it speeding up a process that still needs the human touch to get right?

AI Is Changing the Way M&A Deals Are Done—But It’s Not Perfect

AI has undoubtedly made its mark in M&A, especially for private equity firms looking for speed and precision. According to a recent McKinsey survey, 65% of companies have started using generative AI across different areas, including deal sourcing and due diligence. The ability to sift through thousands of potential targets quickly and perform complex financial modeling within seconds makes AI an attractive tool in M&A. For example, platforms like AlphaSense allow firms to rapidly screen and analyze potential acquisition targets by processing large volumes of financial data, news, and company filings. This helps dealmakers efficiently navigate the early stages of dealmaking, saving time while uncovering high-potential opportunities

But here’s where things get tricky. While AI can handle the heavy lifting of data analysis, it struggles with the less tangible aspects of dealmaking—like gauging whether two companies’ cultures will blend well after a merger. That’s a critical piece of the puzzle, and it’s one that AI just isn’t designed to solve.

AI’s Built-In Biases and Lack of Transparency Can Be a Problem

One big challenge with AI is bias. AI models can sometimes reinforce existing biases, especially when they rely heavily on historical data. This can lead to skewed outcomes in M&A, favoring targets that fit traditional criteria and potentially overlooking innovative or diverse-led businesses. Experts, including those at EY, emphasize the need for strong governance and ethical frameworks to minimize these risks and ensure AI-driven decisions are fair and transparent

And then there’s the “black box” issue. AI’s complex algorithms make it hard for decision-makers to understand why a particular choice was made. This becomes a problem during compliance reviews, where transparency is critical. Legal experts warn that AI’s lack of clarity could mean missing ethical red flags, like inadequate disclosure of information.

Quick Decisions Aren’t Always the Best Decisions

AI’s speed can be a double-edged sword in M&A. While it enables faster deal closings, it often overlooks critical factors like cultural fit and employee sentiment—key elements for successful integration. Experts note that poor cultural integration and employee disengagement have been common outcomes in AI-supported deals, especially when human oversight and detailed planning are lacking.

Experts Say AI and M&A Needs Human Oversight

Experts agree: AI can be a powerful tool in M&A, but it’s not a substitute for human judgment. Anu Aiyengar, Global Head of M&A at JPMorgan, points out that while AI excels at screening and data-heavy tasks, it falls short in areas that require strategic thinking. Similarly, Deloitte’s AI Institute reports that only 18% of companies have robust AI governance frameworks in place, indicating that many firms are deploying AI without clear ethical guidelines. This gap in oversight presents significant risks, including unintended bias and compliance issues

To truly enhance M&A, experts suggest that AI must be combined with human oversight. This means implementing regular audits, establishing clear ethical guidelines, and paying attention to less quantifiable factors—like culture and compliance. These measures are crucial to ensure that AI-driven decisions remain fair, transparent, and aligned with broader strategic goals.

Balancing AI’s Promise with Ethical M&A Practices for Better Outcomes

AI has tremendous potential to reshape M&A, offering speed, data-driven insights, and operational efficiencies. But as it stands, AI alone can’t deliver the full picture. While it excels at processing vast amounts of data, it falls short in areas that require human intuition, like cultural fit, ethics, and strategic foresight. Experts agree that AI’s role should be complementary—serving as a tool to support, not replace, human decision-making.

If dealmakers want to truly harness AI’s power, they must prioritize ethical frameworks, regular audits, and human oversight. Without these elements, AI’s promise of smarter, faster deals could quickly turn into a recipe for superficial outcomes and increased risks.

As AI continues to evolve, now is the time for firms to review their approach. Are you using AI thoughtfully, or are you moving too fast, without considering the potential downsides? To stay ahead, ensure your AI strategies are built on a foundation of ethics, transparency, and long-term value creation.

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