Hours of desk duty, hundreds of pages of contracts, and too much coffee – among lawyers, stories like these from the tough training period are commonplace, and almost everyone has one. Younger generations, on the other hand, could be spared such experiences thanks to artificial intelligence (AI). Technology can change many parameters in M&A processes, especially in data-based areas.

In the search for suitable M&A targets, for example, 83% of professionals expect technology to bring about changes, according to a survey of more than 230 executives and M&A managers at companies conducted by Linklaters and the Technical University of Munich. 84% expect changes in the due diligence process. Of these, more than 40% even expect AI to have a major impact on these areas. According to the respondents, there are likely to be less drastic changes in the use of AI in negotiations or post-merger integration.

Mario Pofahl, M&A partner at Linklaters, already sees AI making things much easier in many steps along the M&A process. In many cases, this is due to the underlying structure of the tasks: „Law is the rule-based application of language to an issue,“ explains Pofahl. This puts it in the core application area of large language models, such as those on which ChatGPT is based.

Such models are used in the M&A context, for example in drafting or due diligence, when documents relating to the sales process are reviewed and scrutinised. The artificial intelligence can summarise documents or search for specific clauses. Artificial intelligence is also useful for secondary tasks, such as creating complex charts to visualise shareholding structures. „These may be minor issues in themselves, but the time savings add up,“ says Pofahl.

In Pofahl's view, the potential for AI is huge, as some topics are perennial favourites in due diligence processes. For example, the examination of change of control clauses, which entail possible cancellation rights in the event of a change of ownership, is regularly on the agenda. Finding the clause in the contract is already possible with AI – in the next step, a tool could also suggest text modules for possible approaches. „The majority of client recommendations have already been formulated in a similar way,“ explains Pofahl.

Many law firms are currently taking a multi-pronged approach and are looking into both collaborations and developing their own AI tools. This sometimes requires large investments. Some firms are currently engaged in strategic discussions about how to allocate resources. At the end of 2024, Linklaters created the „AI Sandbox“, in which employees can work on their ideas for the use of AI in a protected test environment. In addition to approaches developed in-house by law firms, external providers are also entering the market. Before using in-house AI, however, it must be ensured that data protection regulations have been implemented, for example. The more diverse the tool landscape is, the more complex this is. The ideal solution for many M&A lawyers would therefore be a centralised application that can cover all AI use cases from start to finish.

However, M&A lawyer Pofahl still sees this as a major challenge when using AI, saying that "there are special applications for every phase and every task in the M&A process.“ A centralised application has not yet emerged. „There are hundreds of tools,“ he points out. The Linklaters team alone is keeping an eye on around 300 applications worldwide. It is still unclear which ones will prevail and which horse to back. „Keeping an overview is one of the main tasks right now.“

Kai Hesselmann, co-founder of the M&A platform Dealcircle, is also seeing a lot of start-ups along the M&A value chain. „Innovations and isolated solutions with an AI approach keep popping up.“ Many of these are aimed at searching for potential takeover targets, i.e. target screening. Among M&A consultants, Hesselmann has observed a FOMO phenomenon – fear of missing out. „Nobody wants to let the technology train pass them by. However, this often leads to the actionist use of an AI tool that is only of limited help.“ The large selection of AI applications can easily lead to potential customers being overwhelmed.

The growing number of new customers is directly relevant to Dealcircle's business. The platform specialises in M&A matching in the small and micro-cap sectors, and targets sales advisors and buyers as customers. Algorithms are used to match sell-side projects with suitable buyers. The new players want to penetrate this field. „This is already a moment where business models are changing and alliances are being rethought,“ says Hesselmann.

He believes that he currently still has an advantage over the new providers: „In over seven years on the market, we have built up a comprehensive database that is not accessible to start-ups,“ he says. They usually have to develop their algorithms with public data.

To consolidate his own position, Hesselmann has already considered acquisitions. However, Hesselmann believes that the technological differentiation of AI start-ups is often too low. „Many tools can be replicated. You could buy up dozens of competitors every year and new ones would be created straight away.“

Conversely, platforms such as Dealcircle could also become potential takeover targets, as data room providers are also increasingly entering the matchmaking market and expanding their offerings with AI tools. At data room provider Intralinks, for example, the AI assistant Link is designed to answer users' questions about the documents stored in the data room, initially for English texts.

Last year, the US software company Intapp announced the acquisition of the Berlin start-up Delphai. The strategic goal behind the transaction is to integrate Delphai's technology into its solutions. The Delphai software is intended to support the analysis of data and can also be used in the search for potential takeover targets. The buyer Intapp's portfolio includes the deal management platform Dealcloud.

Hesselmann assumes that the revenue models of traditional M&A consulting will also change when it comes to matchmaking. „Part of the revenue could shift away from M&A advisors and towards automated matching services,“ he expects. Artificial intelligence could therefore increase the speed of the M&A process. In return, however, advisors could also work more efficiently and thus reduce their costs. „This may reduce turnover, but not necessarily profitability.“

In Hesselmann's view, M&A advisors will continue to be needed. On the one hand, because someone has to take responsibility for liability reasons – but also because there are issues where AI is of no help. „Especially in the small-cap sector, companies are often still closely linked to the founders‘ personalities,“ says Hesselmann. For the founders, a sale is an exceptionally emotional situation. „Supporting a person in the sale of their company requires empathy and experience. We will need people in the process for a long time to come,“ he is certain. He also notes that experienced advisors have an advantage in purchase price negotiations.

In the legal context, Pofahl still observes „a fundamental scepticism among many clients“ when it comes to the use of AI, despite all the progress that has been made. Pofahl reports that possible cost savings through the technology are still of secondary importance in discussions with clients at the moment. One reason for this is that the work „currently still requires a lot of people“. For example, the algorithms still need to be taught and trained on new file formats, and the output still needs to be scrutinised. „We are already seeing considerable time savings through the use of AI, but this will increase significantly in the coming years,“ the lawyer expects.

By then at the latest, there are also likely to be business changes. Certain fields of activity that have regularly appeared on clients' invoices to date could be a thing of the past in just a few years. „Large deal teams with many associates who have to look through hundreds of documents – this is likely to become a rarity in the long term,“ says Pofahl. Instead, it will be even more important to negotiate cleverly in M&A processes, find a good deal structure, and develop creative solutions.

„The most exciting part of our work is working with other people to find solutions for complicated transactions,“ says the lawyer. „That's here to stay.“ However, it remains to be seen how business models will develop when some of the routine work is automated. Pofahl believes that law firms will differentiate their range of services to a greater extent. „The part that will be important in the future will require creativity and experience. If you approach it skilfully, you can also see this as an opportunity to differentiate your own offering from the competition and focus on specific areas.“