Artificial Intelligence is revolutionizing the M&A landscape, enhancing efficiency and precision while reshaping how deals are sourced and executed. From pitch to close, Artificial Intelligence (AI) plays a pivotal role at every stage of the deal process, with its greatest strengths emerging in target sourcing, due diligence and data analysis.
In the M&A marketplace, identifying the right acquisition targets is crucial. With a wide array of valuable opportunities, potential partners, sellers and acquisition targets may not always be immediately evident. Identifying the right match requires navigating large volumes of information and synthesizing it into a strategic and comprehensive target list. While M&A professionals excel at this complex process, the inherently competitive nature of the field demand tools that allow firms to analyze data quickly. AI enhances traditional deal scanning by broadening the analysis to include both organized data (i.e. numbers and lists) and more complex data (i.e. incoherent text), generating deeper insights and uncovering high-value opportunities that align with strategic, financial and cultural criteria. The combination of an M&A professional's expertise with AI enables teams to make quick, confident decisions and gain a competitive advantage.
AI has become an asset in the due diligence stage of M&A deals, streamlining document review and data room management. Some data room providers are integrating advanced AI features into their platforms, significantly enhancing due diligence processes. These tools automate repetitive tasks, flag potential risks and extract meaningful findings from extensive document sets.
While the potential of AI in M&A is vast, its integration is not without risks. The efficiency AI delivers does not inherently guarantee better deal outcomes. To maximize its value, individuals and organizations must focus on leveraging the time saved for value-added activities that improve decision-making. Furthermore, AI cannot replace human judgment; M&A advisers must carefully determine where to apply AI and where human expertise is indispensable. It's crucial to set clear standards for using AI, including measures to protect confidentiality and prevent bias, to reduce risks effectively. With thoughtful planning and comprehensive protocols, AI can significantly enhance the efficiency and accuracy of the M&A process.
The adoption of AI in M&A workflows signifies a profound shift in how deals are sourced and executed. By enhancing target identification, streamlining due diligence and improving data analysis, AI empowers firms to navigate the complexities of M&A more effectively, enabling transaction advisers to save time and focus on optimizing deal outcomes.
M&A Market Activity
In December 2024, U.S. deal volume experienced a decline, down 12.7 percent compared to December 2023. Despite the slight decrease, M&A activity is set to increase, driven by stable financing, reduced recession risks and stronger strategic needs. Federal Reserve rate cuts will lower capital costs, boost confidence and support the M&A market by making investments more attractive.
The Pittsburgh M&A market experienced a consistent deal volume in December 2024 compared to the same period in 2023. December 2024, saw several noteworthy transactions completed by both strategic acquirers and private equity firms. Westinghouse Air Brake Technologies Corporation (Wabtec) and Sharp Therapeutics Corp. completed strategic acquisitions, while Pittsburgh-based private equity firm Riverarch Equity Partners acquired Metal Supermarkets IP, Inc.
Deal of the Month
On December 30, 2024, Bloom Engineering Company (Bloom Engineering), a custom-engineered burners and combustion systems company headquartered in Pittsburgh, PA, acquired Wabtec, a Pittsburgh-based freight, rail and transit company. The deal is expected to enhance Wabtec’s energy solutions portfolio and gear transfer technologies and strengthen its capabilities in delivering sustainable and efficient industrial systems. As part of the integration, Bloom Engineering will join Wabtec's Freight and Industrial Components Group, bringing its advanced burner and combustion technologies into Wabtec’s portfolio and driving growth in this critical market segment.
Sources: PitchBook™, S&P Capital IQ, MelCap Investment Banking knowledge, company websites and public company filings.
Christopher Sfeir is an Analyst with MelCap Partners, LLC, a middle-market investment banking advisory firm. For more information on MelCap Partners, please visit www.melcap.com or email [email protected].
