How AI Is Transforming M&A Due Diligence
In legal terms, M&A stands for mergers and acquisitions. A merger is when two companies join together to form a single business, and an acquisition is when one company buys another. Though they seem similar, the key difference is that mergers are often mutual agreements that can happen when the two companies either create a new company or absorb one into the other; whereas in an acquisition, a smaller company can continue to operate under its new ownership or be fully integrated into the buyer’s company, which can often cause slight hostility between the buyer and seller as the smaller company loses its autonomy.
M&A due diligence refers to the verification process of a target company’s financial, legal and operational aspects before the deal is closed. The aim of M&A due diligence is to evaluate potential risks, identify opportunities, and ensure the deal reflects the value of the companies. This process helps the buyers and sellers make informed decisions quickly and limits the risks of the deal by identifying any problems before the deal is finalised. Artificial intelligence (AI) is significantly changing the face of M&A due diligence by increasing its efficiency and automating complex tasks.
In a typical M&A merger, there are seven steps to the process: define project goals; analyse the finances of both companies; evaluate documents against the standard checklist; stress-test business plans; formulate a final offer; manage residual risks and secure approvals; plan integration alongside closing. AI could be very useful for some of these steps as it could quickly scan through all of the data and complete simple tasks. For example, an AI model could spot hidden risks and inconsistencies in documents and contracts which would lead to investigations and quicker decision-making.
Although, it may be harder to use AI for mergers and acquisitions because they are very client centred. For instance, buyers have to request evidence of many things from the seller as part of a due diligence checklist. These include financial matters, material contracts, sales approach, litigation, and property to name a few. It would be unwise to use an AI model to do these tasks as it requires clients reviewing and sending these things to the buyer, and any inaccurate information could delay or stop the deal from being finalised. AI hallucinations (when AI makes up information that seems correct but is completely fabricated) are still very common, so it is likely that the AI system could generate inaccurate information which results in the deal being dissolved.
As well as this, AI still cannot provide the same amount of customer support that a trusted specialist corporate solicitor can, which is a very important part of mergers and acquisitions as clients will want frequent advice on how to proceed. The only current solution to this problem is chatbots, which can only generate generalised advice for clients that may not be very useful. This is why AI cannot fully take over the process of mergers and acquisitions due diligence as it does not have the capacity to fully understand and respond to unique client situations.
In 2025, a survey of 1,000 senior leaders from various industries reported that 86% of the organisations used AI to help with M&A workflows, and 65% had done so in the past year. This shows the significant increase in the use of AI in the workplace, specifically in the legal sector. The fact that so many businesses have used AI without major problems shows the effectiveness and accuracy of the systems for M&A due diligence.
Since a merger is the blending of two companies, there are often complex legal procedures because the management structure of the new company and the issuing of new shares need to be arranged. Due to these additional organisational challenges, mergers often take longer than acquisitions to finalise, but this could be improved with AI. An AI model has the ability to complete complex tasks such as dividing up new shares and drafting contracts that ensure each party has an equal share of the company, which would be invaluable in merger deals as it would take a lot of time for a lawyer to do this but could take AI a matter of minutes.
Therefore, AI is slowly changing the face of M&A due diligence by improving the efficiency of research and forming fair contracts, finding hidden inconsistencies or risks, and minimising the chance of human error. Although there are still many inaccuracies and problems with AI systems, there is likely to be an increase in the use of AI for complex problem solving and compromising for business deals in the near future.
At Cook Corporate we are specialists in the due diligence process and are always happy to have an initial, no obligation and confidential discussion about the process.