How AI Can Enhance M&A Deal Sourcing


M&A deal sourcing is one of the most obvious and intriguing application areas that can be improved with AI tools such as ChatGPT. Corporate development teams can miss good opportunities if they don’t notice important developments in real time, and there is only so much target searching, monitoring, and analysis that can feasibly be done manually. Without any automation in place, sourcing and monitoring targets usually happens sporadically because most companies lack the time and resources to do it every day.

Historically, there haven’t been effective ways to proactively identify optimal times to approach targets. There is usually not a systematic approach for developing and refining the ideal target criteria to best serve a company’s goals, either. Artificial intelligence (AI) can significantly improve the M&A deal sourcing process and help users:

  • Refine strategy
  • Pinpoint ideal target companies
  • Gather valuable information on those targets
  • Estimate private metrics
  • Track targets for notable events that may signal opportune moments for M&A discussions
  • Create customized outreach communications

Let’s look at each step of the process in more detail:

  1. Define What to Source: AI can assist in analyzing your market and your existing pipeline to develop a clear sourcing strategy and ideal target profile definition. Taking a bottom-up approach, AI can analyze your existing pipeline, understand which companies have progressed in the pipeline, and derive a generalized ideal target profile definition from that information. It can also help map your strategic market landscape in different ways to identify crucial market developments, competitive dynamics, and future trends. For example, AI can help you map your current value chain, recognize market-changing trends, and identify promising startups leading these trends. This top-down approach is especially powerful when quality targets are scarce or your industry is evolving rapidly.
  1. Identify Targets: AI can automatically identify companies for you based on your target profiles and can produce natural language descriptions of the target companies and their offerings. Target identification can combine information from a broad crawl of the entire public internet and M&A-specific data sources.
  1. Screen Targets: Once you have identified targets, AI can help collect data on targets that are most relevant to your business. Unlike traditional M&A databases, which use a predefined market segmentation approach and data points, AI trained on your custom way of mapping the market will collect data points specific to your needs.
  1. Predict Metrics: AI can approximate interesting company metrics not publicly available. For example, it can potentially estimate revenue based on factors such as the number of employees or social media followers. This can also be applied to predict the success of value creation initiatives and generated synergies.
  1. Monitor Targets: With the right setup, you can use AI to continuously monitor identified targets for interesting events such as new product launches, management changes, or funding rounds. By creating alerts for changes that indicate acquisition readiness or target development, you can engage in new M&A discussions at optimal moments and reduce the need for manual market monitoring.
  1. Outreach: AI can craft personalized outreach emails and other communications based on your instructions and the unique characteristics of each opportunity. This can help you create a better impression and build stronger relationships with targets.

Here are some screenshots of what these can look like in practice:

A list of potential targets for deal sourcing enhanced by AI through the use of a description input.
Pipeline clustering enhanced by AI
Deal sourcing enhanced by AI-generated timeline to monitor a target in the pipeline.
AI enhanced deal sourcing with "similar companies" input.

Final Thoughts

If you are interested in learning more about applying AI to M&A, you can download our “How to Supercharge Your M&A Process with AI” white paper, which discusses these ideas in more depth and covers more AI applications across the entire M&A process from sourcing to due diligence through post-merger integration. At Midaxo we are actively exploring the applications of AI to M&A and would welcome a discussion, if you would like to speak with our M&A technology experts in more detail.

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