Dr. Khalid A. Khan
The transformative potential of generative AI (GenAI) will dramatically impact corporate trading by enabling investors to more accurately identify potential trades and execute them faster and with higher profits There is a possibility.
One reason why mergers and acquisitions (M&A) fail to achieve their objectives is that humans make M&A decisions by synthesizing data in limited ways. However, GenAI can significantly increase competitive advantage by detecting potential M&A targets earlier and improving the diligence performed on anticipated M&A integration and value creation vehicles. I promise you that you can.
GenAI makes this possible by summarizing, synthesizing, inferring, and importantly , to enhance human decision-making through its unique ability to generate new insights.
GenAI can have a significant impact on transaction strategies.
• As many players compete to transform their business models, it can be a due diligence tool to examine the trading market and identify where to allocate capital.
• Simplify the most complex tasks before the transaction closes and on the first day of new ownership.
• Can refer to new products or services that increase value.
GenAI acts as a brainstorming partner and co-pilot in many transaction scenarios. There is an urgent need for leaders to embrace disruptive technologies at their own risk. In a recent EY survey, 62% of CEOs agreed that their organizations need to act on GenAI now to avoid giving their competitors a strategic advantage. But the same percentage of CEOs were unsure how to proceed.
Four use cases for GenAI show how business leaders can start rethinking their future.
1. Understand the trading market: M&A professionals can use GenAI to form a view of market success factors and predict and understand potential buyer and seller reactions. For example, an M&A professional focused on industrial manufacturing may have access to vast amounts of information, including multiple layers of public and private information, such as market research reports, activist investor sentiment, industry analyst recommendations, and transaction data. data inputs and integrate them to make smarter decisions, faster.
M&A professionals can also connect complementary objectives in areas such as research and development, innovation, corporate strategy, and corporate venture capital to better shape M&A portfolio strategies.
2. Learn from past transactions: Through analysis of large data sets, including historical trade documents and market reports, healthcare trade specialists use GenAI to infer valuable insights into why some trades succeed and others fail. and may generate innovative ideas with potential trends. This helps buyers and sellers justify their evaluations and take action.
3. Basic support for M&A and sales: To carve out and sell your business, you will need to form a new legal entity. For companies considering global technology, transactions may require new registrations, new regulations, and often significant global vetting and documentation.
Tax professionals research jurisdictions and lawyers consult with other lawyers, but collecting and integrating this information is time-consuming and costly. GenAI will assist with the administrative tasks associated with gathering and consolidating the information necessary to form a new legal entity. Data can be drawn from previous studies using public information obtained from different regions. Similarly, GenAI can assist investors in negotiating Transition Services Agreements (TSAs) by leveraging precedent and reducing time-consuming processes.
Four. Regulator expectations: GenAI effectively analyzes information on trades closed by regulators across sectors, extracting key metrics on competitive environment, price elasticity, and market share to determine how regulators should approach specific trades. It can provide valuable insight into what you’re seeing.
There is a story worth noting. Because GenAI has powerful powers to perform synthesis and inference using large datasets, it is not without potential security, ethical, and legal uncertainties. GenAI can create illusions. This could be a connection of information that exists mathematically in the deep learning model but does not exist in the real world. Therefore, proper guardrails need to be put in place to mitigate GenAI’s mistakes. Human judgment cannot be ignored.
What does this mean for your next transaction?
If you’re considering GenAI for dealmaking, whether you’re a serial acquirer or not, here are three things to consider right now.
1. Use GenAI internally to enhance your corporate development strategy. GenAI is a powerful tool that can bring together internal documentation with intellectual property (IP) to understand deal successes and failures, leveraging the rich knowledge from previous deals and applying them to future deals.
Documentation and lessons learned may be isolated to a dedicated location within your company, and connecting to this IP will require an internal exercise. Build your own GenAI solution to provide experts with knowledge across the entire transaction lifecycle to help accelerate processes and increase transaction value.
2. Create a strong data strategy. GenAI’s value comes from enriching large-scale language models (LLMs) with business-specific and accessible IP, such as transactional expertise. This creates differentiated use cases with growth potential.
A well-structured data framework can optimize GenAI’s ability to generate meaningful insights and innovation from a company’s extensive and disparate intellectual assets, while facilitating compliance with data governance and privacy regulations.
3. Adopting GenAI means adapting to change. Those driving GenAI-powered transaction strategies need to be practitioners who define new processes. Technologists may write the code, but artificial intelligence and her GenAI are being democratized.
Having an internal GenAI champion not only helps identify strategies and deploy use cases, but also ensures that GenAI efforts are technically sound, strategically aligned, legally compliant, ethical, and creative. It would be helpful to have someone who can guarantee that. This role will be central to integrating GenAI into the company’s operational structure in a way that engages all practitioners and supports overarching goals and stakeholder engagement.
Keeping GenAI out of deal planning means a missed opportunity for corporate strategy and M&A professionals. Without the better insights that GenAI could have uncovered, the risk for trading professionals is to use scarce capital to make the wrong trades, miss out on hidden trade synergies, or incur stuck costs. It’s something to hold onto.
Using GenAI with proprietary trading data and broader market intelligence, trading professionals can quickly present attractive offers while competitors are surveying the landscape without GenAI insights. You will be able to do it.
Learn more about how EY teams can support your development. GenAI and trading strategy.
Dr. Khalid A. Khan He leads the EY Americas Strategy and Transactions Artificial Intelligence Group. The group leverages advanced analytics and quantitative frameworks, backed by deep engineering and technical acumen, to support the understanding, adoption, and implementation of advanced emerging technologies.
The views expressed in this article are those of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the EY global organization.
