Data analysts used to spend weeks and months going over data ahead of mergers and acquisitions (M&As) and initial public offerings (IPOs). They addressed every possible ROI and risk scenario and estimated what stock prices would emerge from these deals and their long-term outlooks.
For their efforts, these are highly compensated professionals who are about to lose their jobs to AI. Pre-M&A and -IPO analysis is becoming more science than art as CEOs turn to AI for answers.
A recent EY study of 1,200 CEOs found that 27 percent of respondents are making artificial intelligence (AI) a significant portion of their M&A procedures. Some 44 percent are making their steps in its application.
As GenAI capabilities improve, CEOs are choosing not to take any risks, and are leveraging the technology to tackle challenges presented by M&As, from origination to integration.
AI and data crunching
Be it to identify a suitable acquisition target or list shares as part of an IPO, this all requires proper due diligence. That time-consuming affair is something AI can shrink to hours and days instead of weeks and months.
AI can swiftly analyze huge amounts of data from financial statements, market trends and consumer sentiments. AI can isolate insights that analysts might overlook. It can correlate facts and figures and draw conclusions based on a maze of metrics that includes alternative and unstructured data sources.
Due diligence
Cloud-based virtual data rooms (VDRs) are hubs where one can access a collection of unstructured data. These typically require teams of lawyers to go through but AI can now use due diligence-specific models to breeze through VDR documents, identifying and extracting pertinent data to transactions like M&As and IPOs.
In the M&A context, AI could analyze information such as a company’s brand, management team, and resources such as product diversity, productive capacity, and financial robustness, and determine which of the combined entities would be a more profitable one.
Predictive analytics
Combining historical data with advanced algorithms, companies can get a screenshot of a future performance for a merged entity or listed stock post IPO and identify areas for optimization.
AI can forecast potential synergies, revenue growth, and operational efficiencies allowing companies to better navigate negotiations, set realistic expectations, and prevent entering into potentially low yield or even unsuccessful outcomes.
Read: Smarter banking is on the way with GenAI
AI companies on investors’ radar screen
Big tech, venture capitalists, and governments are foaming at the mouth to get their funds associated with companies like OpenAI. But even lower ties startups like Cohere and Hugging Face have managed to raise millions in venture capital to accelerate the development of their own AI products.
Generally speaking, tech companies will require no less than $100 million in revenues and a decade into operation before they are ready to go public.
The Wall Street Journal reported that OpenAI is considering selling shares at a valuation of up to $90 billion. The Information previously reported the company is on track to generate $1 billion in revenue in the coming 12 months
AI software company Beijing Fourth Paradigm, founded in 2014 and sporting the slogan “AI for everyone”, is aiming to raise up to $144 million by selling 18.4 million shares, according to its regulatory filings.
Three cornerstone investors, headed by New China Capital Management, have subscribed for about $96.8 million worth of stock, which equates to 70.6% of the IPO.
Arm Holdings, the chip design company controlled by SoftBank, performed its initial public offering last September 14, when it sold 95.5 million shares.
ARM is not an AI company but it supplies chips for the AI sector. At the open, Arm was valued at almost $60 billion.
The stock first traded at $56.10 and ended at $63.59.
Arm expects the total market for its chip designs to be worth about $250 billion by 2025 as it is used in nearly every smartphone chip.
The company sold $735 million in shares to strategic investors comprising Apple, Google, Nvidia, Samsung, AMD, Intel, Cadence, Synopsis, Samsung and Taiwan Semiconductor Manufacturing Company.
SoftBank CEO Masayoshi Son emphasized how Arm’s technology is used in AI chips, tying his firm to the boom in AI and machine learning.
He said he has spent months creating hundreds of inventions with AI-powered ChatGPT that he believes can be realized through Arm.
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