Leverage AI and digital transformation to address people risks in M&A 

From data scraping and analytics to automation and generative AI, these cutting-edge tools are reshaping internal processes, transforming the human capital experience, and revolutionising the work employees perform. As organisations delve into the potential of AI technologies, they are seeing a profound impact on every stage of the deal life cycle. Get ready for a paradigm shift as we explore how technology is redefining people elements in M&A, unlocking new possibilities, and challenging traditional norms.

It's easy to understand the appeal of AI in the context of Mergers and Acquisitions. M&A involves fast timelines and turnarounds, digestion of significant amounts of data (or lack thereof) in a short period of time, and overlapping dependencies between different workstreams. That makes it a natural target for AI technologies — which can drive speed and efficiency across the deal life cycle — including process improvements and efficiencies, improved deal intelligence, better deal decisions, improved risk identification, and cost reduction.

From a people perspective, interdependent workstreams and the broad implications on people-related risks make the potential impact of AI technologies substantial. However, AI must be effectively managed to ensure that human capital and other deal professionals are not left behind the curve as organisations and individuals continue to learn more and integrate AI into their day to day lives. 

While the term AI (Artificial Intelligence) is thrown around loosely, generative AI, data scraping and analytics, automation and related technologies have gained widespread attention since the release of ChatGPT in November 2022. Organisations are starting to notice both the capabilities and double-edged impact it can have on internal processes, the human experience, and the work outcomes we measure.

AI has become imperative in an environment of continuous uncertainty. Nearly half (48%) of executives expect that investing in AI will deliver substantial business growth this year and 39% specifically believe investing in Gen AI will substantially enhance productivity. Even more interesting, 1 in 4 predict it will fundamentally change their business model, and over half believe their company will not survive beyond 2030 without Generative AI technologies¹.

According to Mercer’s 2024 Global Talent Trends study, a majority of executives will continue focusing on AI and automation in the coming year. AI is expected to augment workforce efficiency to increase productivity by between 21% and 35% — in fact.

However, that same research also shows that many HR leaders and executives are still struggling to understand exactly how AI will add value. 

These findings suggest we are still somewhat focused on doing things faster rather than exploring how teaming humans and machine can improve higher order applications and outcomes. 

The use of AI and other technologies also has its fair share of risks when applied in an M&A setting. One obvious example is in the matter of privacy and security. The confidential nature of M&A work means data must be protected, and companies must ensure that deal data is not loaded into a public or non-secure AI environment.

Other risks include inaccurate information, bias, lack of context awareness, misinterpretation, security vulnerabilities, lack of transparency and accountability, legal risks, lack of human expertise just to name a few.

Despite these glaring concerns, 23% of companies have no mitigation in place to address risks associated with AI adoption¹, which is alarming given more than 50% of employees say they use generative AI weekly at work². In our opinion, these technologies in their current state should be used to supplement, not replace human capital teams’ M&A processes. Companies should make decisions about embedding AI technologies into internal processes only after detailed review with other key stakeholders (e.g. IT, legal, CorpDev, etc.) — and policies should be set accordingly.

All of this begs the question: Are we ready for AI? Mercer data shows that only 13% of executives believe that a majority of their workforce is ready to adapt to the new world of work, if their jobs were fundamentally changed or eliminated by AI & automation¹.

One way to ensure that AI and other transformative technology is being applied to M&A in the most efficient and productive ways is to proactively integrate it into your M&A playbook.

M&A playbooks enable deal teams to work more efficiently and effectively through the application of a common structure, processes and tools that maximises the deal team’s ability to drive desired outcomes. To adapt to both an environment of increased disruption and the rise of AI, Mercer’s M&A Advisory Services team has adapted our model, moving from a standardised approach with pre-defined scenarios, to a flexible approach, which enables human capital professionals to execute on different strategies and provide custom solutions for unique requirements of each deal.

Value of Mercer’s M&A playbook:

• Increases speed and focus of M&A work by accelerating project planning and launch.
• Improves accountability and decision-making by identifying the governance and team structure and roles required to support the deal.
• Enables the team to maximise deal value through a knowledgeable approach, grounded in the deal rationale.
• Provides a flexible approach model which enables HR to execute on different transaction types and strategies and provide custom solutions based on deal requirements.
• Creates a common M&A framework for HR, including terminology, methodology, processes, and tools to facilitate the delivery of HR services and solutions in the end-to-end M&A process and ensures a consistent approach to human capital M&A globally.
• Is easy to adopt and maintain and facilitates knowledge transfer to new staff.

Whether you are an organisation that has an existing M&A playbook or in the process of developing one as you anticipate an uptick in M&A activity, you will want to develop an M&A playbook to account for these new technologies and their applicability to supplementing internal processes. This might even go as far as replacing certain manual aspects of the deal process to create speed and/or savings through efficiency.

Translating ideas into action can be a difficult task to navigate given the influx of AI-related technologies that have popped up over the past 18 months and the continuous improvement in capability; however, we see many organisations starting their journey to understand and utilise AI in their process. Through our experience working on over 1,000 transactions annually, we at Mercer have identified key areas across the deal life cycle where we believe the technology exists today to enhance how human capital supports the deal process and in many aspects, have proof points of success using these technologies in supporting companies’ people-specific M&A processes.

^{1 Mercer Global Talent Trends – 2024 Study}

^{2 Oliver Wyman Forum analysis, Frontier Economics and Accenture.}