While AI technology offers many advantages and conveniences, it also comes with potential risks. Since artificial intelligence operates entirely in a digital environment, most risks stem from digital environments or a lack of preventative measures. If you want to lighten your workload by using an AI tool in your enterprise, make sure you choose the right and reliable platforms.

In this article, we will discuss the potential risks of AI for M&A and how it can affect your enterprise.

TL ; DR

AI brings major benefits to M&A, including time savings, higher productivity, centralized knowledge management, and faster data analysis. However, it also introduces risks: misjudging potential revenue by over-relying on AI forecasts, hallucinations and misleading outputs, regulatory non-compliance (with EU AI Act fines up to €35 million or 7% of global turnover), data security and confidentiality breaches, poor integration causing data loss or missing information, unpredictable token costs from using frontier models for every task, inadequate due diligence from treating AI as the final decision maker, and a shortage of in-house AI expertise. To mitigate these, choose platforms with strong certifications, regional compliance, security controls, cost management features, and human-in-the-loop design. TextCortex offers a secure, compliant M&A solution with knowledge bases, web access, and customizable AI agents for tasks from target identification to market research and outreach, helping firms like Atares save up to 20 hours per employee per week.

What is AI in M&A?

AI in M&A refers to the use of artificial intelligence technologies, such as image generators, large language models, and reasoning models, to automate, accelerate, and simplify various M&A tasks. For example, due diligence, one of the most important stages of M&A, can be accelerated through AI automation and data analysis capabilities, saving time and costs.

Benefits of AI in M&A

AI, as in every sector, offers various benefits in M&A and adds value to your company. The first and most important value that AI offers to M&A is time savings. By speeding up M&A tasks with AI, you can save a significant amount of time per employee. For example, Atares (an M&A company) saves up to 20 hours of time per employee per week with TextCortex AI.

Another benefit that AI provides to M&A is increased productivity. Manually completing tasks that require working with vast amounts of data, such as document analysis, market research, and risk analysis, can take days or sometimes weeks. Thanks to AI, you can automate a wide range of tasks, from data analysis to document summarization, and dedicate your time and focus to more valuable tasks such as synthesizing and reviewing analysis results. AI only helps you with the analysis part and generating output; you are still the one who will make the final decision by reviewing the results.

AI platforms like TextCortex offer an AI-powered centralized operations base for M&A. With AI, you can manage and analyze all your databases from a single platform and find the information you need in a conversational format instead of spending hours reviewing documents. Furthermore, AI allows you to process raw data and transform it into information and insights in the format you require. For example, you can convert raw data inputs into Excel documents using AI, or create visual materials using image generators.

AI Risks

Using AI, as in every sector, comes with risks for M&A due diligence. However, you can avoid these risks by using AI platforms that offer reliable and advanced security and certifications. Let’s discover the most common AI risks in M&A due diligence.

Misjudge Potential Revenue

AI tools generate output based on existing data and statistics, and potential revenue estimation is no exception. AI platforms use market growth, company statistics, and the data you provide to measure a company's potential value. Because AI is not a medium, its predictions do not include real-life cases and cannot predict volatile market trends. Therefore, instead of using AI's output as a final decision, you should only examine the data it provides and combine it with your experience, market knowledge, and your own predictions. Ultimately, even AI couldn't have predicted that Nokia would lose value and fail to maintain its market power after the smartphone launch.

Hallucination and Mislead Information

AI tools can sometimes deviate from the given data and provide incorrect or untrue information to generate output. To avoid such situations, it is necessary to use models that minimize hallucination output generation and generate output based on the inputs and databases you provide. Frontier AI models are evolving to minimize hallucination output generation. Furthermore, AI platforms use special parameters and limitations to prevent this.

Regulatory Risks

If you don't use an AI that complies with the regulations of the region you serve, there will be financial penalties. For example, in the European region, companies that do not comply with the EU AI Act are required to pay fines of up to €35 million or 7% of the company’s global annual turnover. Therefore, when choosing an AI platform for your M&A company, the first thing you should pay attention to is whether it complies with the regulations required by your region.

Security Risks

In M&A tasks, you need to process your internal databases and sensitive company data using AI tools. AI platforms offering low security carry the risk of data leakage through various methods, such as prompt poisoning. Therefore, you must ensure that the AI ​​platform you choose for your M&A business has taken the necessary security measures. You must also ensure that the AI ​​platform does not use your data for model training.

Integration Risks

Even if the AI ​​platform you plan to use offers a strong infrastructure, if you cannot properly integrate it into your M&A business, there are risks such as data loss, misleading outputs, and missing information. Therefore, when choosing an AI platform for your M&A business, you need to consider how responsive they are to customer service and the support they provide for integration.

Unforeseen Costs

AI platforms operate with large language models and tokens. Another important consideration when choosing an AI platform for your M&A company is the variety of LLM (Learning, Management, and Marketing) options offered. Using advanced and high-priced models like GPT-5.5, even for the smallest task, can lead to unforeseen and unpredictable additional costs. To avoid such situations, we recommend using AI platforms that offer interfaces allowing you to set parameters such as user-level management and token usage limits.

Inadequate Due Diligence

One of the biggest risks of AI due diligence is relying entirely on it. Using AI as the final decision maker in M&A and due diligence tasks is a misguided approach. Instead, AI should be used to speed up the process and automate tasks that human speed cannot keep up with. Final review and decision-making should still be left to experience and human intelligence. This way, you can avoid inadequate due diligence and prevent potential harm.

Lack of AI Expert

Because AI models are relatively new in the business world and are constantly evolving, there is a shortage of qualified employees who are experts or proficient in using AI. To overcome this, you can familiarize your employees with AI and allow them to gain experience. Having employees already working for your company and familiar with your work culture learn to use AI will increase productivity. Furthermore, this allows you to directly observe the benefits of AI by comparing your employees' normal performance with their AI-supported performance.

TextCortex AI: The M&A Solution That You’re Looking For

If you're looking for an AI solution for your M&A and due diligence firm and want to avoid potential risks, TextCortex is the solution for you. TextCortex is a leading knowledge management and workflow automation platform that helps teams automate repetitive tasks and build a centralized AI-powered knowledge base. With TextCortex, you can accelerate and boost productivity across a wide range of M&A tasks, from research to document analysis. Let's take a closer look at TextCortex's M&A solutions.

Data Management and Data Analysis

TextCortex knowledge bases allow you to analyze the databases you upload or connect to, turning your raw data into insightful information. You can upload documents manually to TextCortex or connect databases like Google Drive, OneDrive, Slack, and Notion with a single click. Afterward, you can automate a wide range of data-related tasks, from target identification to dataset processing, saving you time. For example, Atares saves up to 20 hours per employee per week by automating data-related tasks and enhancing knowledge management with TextCortex.

Market Research and Web Access

TextCortex web access allows you to automate tasks requiring real-time online data, such as market mapping, cold outreach, and market monitoring. By combining both internet data and your own data, TextCortex processes even the smallest details that might otherwise escape human attention, maximizing your research quality.

Custom Workflow Automations

TextCortex shines with its highly customizable automation capabilities. With TextCortex, you can automate a wide range of deal sourcing tasks, from simple tasks like cold outreach email/message writing to complex tasks with multiple steps, such as data enrichment. TextCortex already offers AI agents optimized for different tasks. However, with the TextCortex AI agent framework, you can build AI agents that you can customize for your specific tasks, from the default large language model to databases. You can complete the entire process manually or using our AI-powered agent builder. 

Questions fréquemment posées

What are the risks of using AI in M&A?

Risks of using AI in M&A include:

  • Misjudge Potential Revenue
  • Hallucination and Mislead Information
  • Regulatory Risks
  • Security Risks
  • Integration Risks
  • Unforeseen Costs
  • Inadequate Due Diligence

Can AI leak confidential deal data?

If the AI ​​platform you are using does not take the necessary security and privacy measures, it is possible for the AI ​​to leak confidential deal data. For this reason, we recommend that you choose platforms like TextCortex, which prioritize security and privacy and possess certifications such as SOC Type II, ISO 27001, and GDPR.

Is ChatGPT safe for M&A due diligence?

Using the public version of ChatGPT for M&A due diligence is not safe. Even using one of the premium versions of ChatGPT carries the following risks:

  1. Confidentiality Breaches
  2. Waiver of Legal Privilege
  3. Hallucinations