The Best Way to Gauge M&A Deal Execution Trends - Look to the Transaction Risk Insurance Market.
The best way to get a good read of the latest trends in M&A deal execution is to speak to the transaction risk insurance market.
The most active M&A insurance brokers and underwriters see the best cross-section of deals from different investors and across asset classes, sectors, jurisdictions, and diligence workstreams of any stakeholders in the market.
I asked M&A folks what (if any) changes the market had seen in the last 12-24 months in respect of the way in which due diligence reviews are being undertaken by advisors and/or investment teams, particularly in light of the technology / AI available to improve/speed up the process.
From the feedback I received (unanimous), there has been close to zero evidence of AI / other review technology being used to undertake any of the due diligence submitted for review to the insurers.
In this day and age - particularly if you immerse yourself (as I do) in both the AI bubble and professional services PR - this seems inconceivable.
As I am sure we all know, the technology already exists - and, if managed properly, can easily be deployed - to make the due diligence process materially more efficient and, based on my own experiences, no less effective than 100% human review.
I had wondered if the absence of reported sightings can be explained by one or more of the following:
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My limited sample size. I initially thought this was likely, but I have now had feedback from some of the largest and most active insurance professionals from across the US, UK, EU, Middle East, Africa, and Asia. It seems my sample size is a fair representation of the broader market.
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The use of technology in the DD review not being clearly disclosed. This seems plausible. But advisors I have tested this with have told me that their risk management teams would require them to clearly disclose the use of / reliance on AI / other review technology. And Moreover, the underwriters I have asked have all (understandably) explained that they would want this to be disclosed as it could materially impact their risk assessment. So this seems unlikely.
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For some reason, there is a link between those deals that may be insured and the use (or disclosure of the use) of technology in the DD process, which makes deals submitted for insurance coverage unrepresentative. This also seems unlikely, particularly as insurance products are so heavily used by some of the most prolific M&A investors, which you would think would make these deals more likely to be subject to the use of technological tools of efficiency.
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The use of technology in the DD review process is far less widespread/common than market commentary would have you believe. This now seems to be the most plausible explanation.
Why do you think this is?
