How is artificial intelligence changing due diligence processes in M&A?

Due diligence is one of the fundamental pillars of any merger and acquisition (M&A) transaction. Its traditional purpose has been to identify financial, tax, labor, corporate, regulatory, or legal contingencies that may affect a company's value or influence an investment decision.

However, the increasing digitalization of businesses is gradually expanding the scope of these review processes. Alongside the traditional areas of analysis, issues related to data management, cybersecurity, technological dependencies, and the use of artificial intelligence (AI) tools within organizations are becoming increasingly relevant.

This trend is not merely the result of the natural evolution of the market. In recent months, various European institutions and supervisory authorities have been assessing the impact that artificial intelligence may have on operational resilience, cybersecurity, and risk management in organizations with significant technological dependencies. Although much of this discussion has taken place within highly regulated sectors, it reflects a reality that affects an ever-growing number of companies: technology has become a strategic asset whose management can significantly influence perceptions of business risk.

Artificial Intelligence as a Due Diligence Support Tool

Artificial intelligence is transforming the way pre-acquisition review processes are conducted.

Document review, information classification, and preliminary contract analysis can now be carried out much faster than was possible just a few years ago. Similarly, certain AI-powered tools can process large volumes of financial, corporate, and commercial documentation, making it easier to identify potential issues and areas requiring particular attention.

These capabilities allow transaction teams to devote a greater proportion of their resources to interpreting identified risks and assessing the strategic implications of the deal.

Nevertheless, the effectiveness of these tools depends on proper professional oversight. Validating the information obtained, contextualizing findings, and making informed decisions continue to require experience, judgment, and specialized expertise. While artificial intelligence can accelerate certain tasks, ultimate responsibility for the analysis and conclusions remains with the professionals involved in the transaction.

When Artificial Intelligence Becomes Part of the Review Itself

The most significant development is not simply the use of AI during an M&A transaction. In some cases, the target company's own use of artificial intelligence may become a material area of review.

In certain industries and technology-driven transactions, the term AI Due Diligence is increasingly used to describe the assessment of risks associated with the use of artificial intelligence systems within an organization.

The objective is not merely to identify which AI tools a company uses, but to understand how they are used, what types of information are processed through them, what internal oversight mechanisms are in place, and what controls have been implemented to manage the associated risks.

This can be particularly relevant for companies with a high degree of technological dependency or intensive data usage, where factors such as internal governance, reliance on specific technology providers, access management, and cybersecurity protocols may represent additional areas of concern for potential buyers and investors.

Confidentiality, Data Protection, and Information Governance

Confidentiality remains one of the core principles of any corporate transaction. The introduction of new technological tools does not diminish this requirement; on the contrary, it reinforces the need for robust control and oversight mechanisms.

The use of artificial intelligence requires a clear distinction between public information, strategic information, and confidential information. The nature of the data being processed will determine the applicable protection measures and the internal procedures necessary to ensure its appropriate use.

Proper data classification, assessment of risks associated with third-party providers, protection of critical digital assets, and compliance with applicable data protection requirements form part of an area that is likely to continue gaining importance within certain corporate transactions.

A Broader View of Due Diligence

The scope and depth of any due diligence process will depend on multiple factors, including the industry sector, the size of the transaction, the buyer's risk profile, and the specific characteristics of the target company.

However, it is evident that the growing importance of intangible assets, information, and technology is expanding the traditional focus of these reviews. The identification of technology-related risks is becoming increasingly relevant within the overall assessment of many corporate transactions, particularly where technology constitutes a significant component of the business model.

In this context, understanding how an organization manages its data, protects its systems, and oversees the use of emerging technologies can provide an additional layer of insight alongside the financial, legal, tax, and operational aspects traditionally examined during an M&A transaction.

At ILIA ETL GLOBAL, we view due diligence as a key tool for providing buyers and investors with a comprehensive understanding of the risks and opportunities associated with a transaction. In an environment where technology is playing an increasingly central role, it is becoming ever more important to assess financial, legal, tax, operational, and technological factors in a coordinated manner to support informed decision-making.

By Mario García