Voluminous information in M&A transactions

M&A transactions can be time-intensive, often involving contract discovery and analysis, due diligence, data room preparation, verification of representations and warranties, privacy issues and multijurisdictional privacy legislation and intellectual property protection, among other important aspects. As deals become larger in value and scope, the review and analysis of the foregoing information becomes both voluminous and jurisdictionally dispersed. The international nature of companies and deals often result in contracts that are drafted in languages other than those commonly spoken by the lawyers on a file. To maximize efficiency, minimize errors and drive down costs, law firms are increasingly looking to incorporate advanced technology in order to streamline the process.

Artificial Intelligence platforms for information processing

Enter artificial intelligence (AI) platforms. AI enables law firms to review a large number of contracts for standard considerations in a systematic manner, including change-of control, assignability, and term, while minimizing errors or oversights in the function that the AI program is coded to perform. An AI program for due diligence collects the pertinent documents at their source, filters agreements from non-agreements, and then identifies, analyzes, and classifies the content of the contracts. This permits the program to organize and structure the documents in the Virtual Data Room, as well as identify and even complete, to the extent permitted and possible, the missing fields. Due to advances in machine learning, a given AI program run in successive iterations can learn and retain knowledge of key contract clauses and previously encountered due diligence issues. Since AI processes the contracts that are relevant to the transaction, a lawyer’s review of the data output provided by AI is much more time- and cost-efficient than manually performing the review from the outset. This allows lawyers to focus their time on more sophisticated tasks, such as analysis of the data output and providing recommendations to the client. As we reported last year, Kira’s Diligence Engine, a machine learning contract search platform, claims that AI platforms can save lawyers 20-90% of time expended on contract review without sacrificing accuracy.

Uptake of AI

With new and promising developments in AI constantly reported in the media, many individuals and businesses sometimes wonder why the uptake of this technology seems to be slower than expected. Law firms, while eager to adopt new technologies for clients, must consider both suitability and security. AI platforms are still fairly novel and must be refined for the due diligence context in order to outperform the efficiency and effectiveness of current methods. Furthermore, as a relatively new technology, most developers focus their efforts on becoming leaders in AI innovation, so as to obtain first-mover advantage and the corresponding financial and reputational benefits that are conferred through patents. Data privacy and security are often considered and refined in later stages, and it is only at this point, after repeated testing and an established market presence, that law firms and clients can become comfortable with the integration of an AI platform.

The author would like to thank Shan Arora, Articling Student, for his assistance in preparing this legal update.

Stay informed on M&A developments and subscribe to our blog today.