AI will change corporate deal-making forever, says ICAEW
The ability to predict and shape the long term success of global takeovers is often seen as the ‘holy grail’ for CEOs, investors and their advisors, and a new report from chartered accountancy body ICAEW and Drooms reveals that some key decision making may soon be taken away from humans and guided instead by the application of artificial intelligence (AI) in many stages of a deal process.
The report, AI in Corporate Advisory, is the first in the world to specifically address the application of AI to corporate deals - which in 2018 involved transactions worth USD4 trillion globally.
AI in Corporate Advisory focuses on the opportunities and risks of using AI for those involved in corporate finance transactions, including: businesses, investors, advisers, bankers and the wider economy. It explores how AI technologies will augment the existing business models of advisory firms, corporations and consulting groups, allowing organisations to do better due diligence, make better predictions, and guarantee the success of deals.
To inform this project, ICAEW’s Corporate Finance Faculty and Drooms carried out extensive research and also convened an Expert Consultative Group that included many of those who are leading the development of AI-based services and applications within major professional services organisations including PwC, Deloitte, EY and KPMG, as well as many of the City’s leading law firms and banks. The Expert Consultative Group was chaired by Lord Tim Clement-Jones CBE, a leading UK parliamentarian and expert on the application of AI.
Lord Clement-Jones CBE, Co-Chair of the All-party Parliamentary Group on Artificial Intelligence, says: “AI in Corporate Advisory shows great initiative by ICAEW to bring together all these major organisations. AI, even in its narrow form, will have a profound impact on corporate governance. This report is the first in the world to specifically address the application of AI in the context of Mergers and Acquisitions. Potential benefits include faster, more accurate and more insightful due diligence processes. Professional judgement will become more, not less, important in the age of AI, but in a global AI market dominated by the US and China, countries such as the UK will need to increase public and private investment markedly.”
The report makes several recommendations for the implementation of AI, including that countries such as the UK will need to continue to increase public and private investment sharply, particularly after Brexit, in an extremely competitive global AI market dominated by the US and China. For example, initiatives such as the GBP20 million Next Generation Services pioneer programme should be expanded to act as catalysts for further innovation and private-sector investment.
In addition, collaboration between professional services firms and technology developers in AI and big data should be stepped up. The global technology companies such as Amazon, Microsoft, Google and IBM are already seeking to shape the way in which AI should work in the professional services industry including via the application of these technologies in accounting and legal services.
The report also says that comprehensive, multi-layered analysis can produce complex results, which require careful interpretation. So, expert professional judgement will become even more, rather than less, important in the age of AI.
David Petrie, Head of Corporate Finance, ICAEW, says: “Our unique research for AI in Corporate Advisory shows for the first time exactly how these new technologies have the potential to help companies, investors and advisors make even better, more informed decisions about deals. Over the next three years there will be a sea-change in the way global mergers, acquisitions and corporate investment decisions are evaluated and transacted.
For professional bodies, such as ICAEW, our role is to ensure that members remain at the cutting edge of the application of these new technologies and that they have the expertise, training and qualifications to make the commercial and ethical judgements vital in the brave new world of AI assisted deal-doing and corporate finance.
Rosanna Woods, UK Managing Director, Drooms: “The advent of AI raises critical issues of trust and accountability, which was why we thought it was so important to work with ICAEW and many other organisations on AI in Corporate Advisory. We all need to maximise the benefits of applying machine-learning by committing to value-based collaboration. Open dialogue will drive positive change.”