How artificial intelligence is going to transform M&A by 2025

If you’ve spoken to an M&A lawyer recently, you’ll have heard that the last few years have been hectic on the deal front.

Deals are on the increase as companies seek to acquire new-world capabilities: M&A is expected to spur 45% of revenue growth over the next three years, up from 30% over the last three years.

According to Bain & Company’s 2021 M&A Global Report, “The most forward-thinking CEOs overwhelmingly declared that they needed a major strategic refresh, and that the M&A roadmap was going to be a critical component of that, that it needed to move faster and have a broader set of more agile and broader thinking behind it”. ?

Curious to explore the digitisation of M&A further, I connected with Charles Lu, former Big Law M&A Attorney turned Director of Account Management (& Chief “Fixer” as he’s known internally) at AI legal tech start up, LexCheck.

Originally trained as a mechanical engineer in Canada, Charles attended law school in the United States to then go on to dedicate several years in New York City Big Law as an M&A attorney, working on mid to large-cap deals alongside “great people”.?

Over time he grew a little frustrated by Big Law’s reluctance to embrace change. He realised that he was “always more entrepreneurial than perhaps a law firm environment is conducive to”. Nor was he virtuous about adhering to the status quo for the sake of it.

Attracted to LexCheck CEO’s track record (because the LexCheck product was still in its infancy), and intent on making a real pivot, Charles found the prospect of start-up legal tech life appealing because he could “get his hands dirty and build something” and gain business experience “on the job”. He could have taken the classic path and gone to business school first, he reflects. But he knew that his “happy spot was creating structure out of chaos”.

He shared that his M&A quasi-legal skills and Type A goal-oriented ways serve him in his current role, which is constantly evolving: from less about being on the tools to more strategy, project accountability and driving implementation and greater efficiency. As well as managing and building a great team.

Now that Charles has crossed to the tech side, it was interesting to pick his brain as to what lies beyond virtual deal processing and virtual collaboration in the field of M&A.?

“Tech will be central to disrupting the M&A landscape in the next two to five years”, he shared.

The current documentation landscape or “M&A product”, as Charles classifies it, is “total chaos” and involves reinventing the wheel every single time. Law firms around the world are documenting M&A deals on bespoke precedents or mashing up precedents from previous deals. Every firm’s M&A document suite is essentially covering the same subject matter, but slightly differently.

This chaos and lack of continuity and consistency across an organisation is only amplified for an in-house M&A legal team working with multiple firms. It can come across as a lack of empathy for the increasing pressure faced by in-house teams but is an unintentional by product of thinking billable units first rather than tech first. “It’s the difference between going to a Ma & Pa burger shop versus going to McDonald’s”.

Meaning, the opportunity for a strategic refresh, moving faster and having a broader set of more agile and broader thinking, is golden.

For that reason, Charles predicts artificial intelligence will have a critical role to play to optimise and more efficiently leverage an attorney’s cross-knowledge from other deals. Particularly for ancillary documents (eg. escrow agreements, bills of sales, certificates, transition services agreements, etc.) by automating baseline requirements for every deal, as well as the substantive advice piece(by leveraging LexCheck’s software to create issues list/s, for example).

The current capability of AI software means that for some of the documentation aspects of any M&A deal, tech delivers standardisation, consistency and efficiency better than a human lawyer.

However, “anyone who tells you AI is going to replace you [lawyers] is probably wrong”. “But anyone who is not looking at AI to make themselves more productive is going to be left behind”.

Using AI is indeed about productivity, helping lawyers learn and execute faster; be more consistent, and lighten the load on those supervising them. Providing negotiation guidance and input to those around the deal table is more likely to be perceived as a value add versus reviewing boilerplate provisions. Tech creates that shift from routine to strategic.

Charles believes that the disruption will be led by “highly inquisitive (and acquisitive)” corporates, private equity sponsors and industry experts outside of law firms, who in turn will exert pressure on law firms to transform for the benefit of clients, Boards, CEOs and shareholders.

As private equity starts using more tech to manage price pressure on certain aspects of M&A deals, “there will be a game of catch up for law firms” who will start feeling the brunt of having a reputation in the M&A marketplace of being outdated.

Because how clients pick lawyers will also be disrupted, Charles adds. Just as McDonald’s always asks, “would you like fries with that [meal]?”, leading M&A lawyers will be asking “would you like tech with that [deal]?”. And that tech competitive advantage is probably being underestimated today.

B&C’s Report states that “Execs [have] an expectation that M&A activity will experience an uptick and become more important for meeting growth goals and for developing new capabilities to compete in an increasingly disruptive environment”.

According to Charles - and I tend to agree with him on this one - that expectation extends equally if not more to M&A lawyers.

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