The world of due diligence has come a long way. Now, it’s poised for even more change as technology continues to shape the way lawyers and other parties secure agreements.
In December 2018, Merrill Corporation released the results of a poll of 400 dealmakers around the globe. According to the report, 22 percent of respondents say technology is the factor driving the most change in due diligence. That could be because another 36 percent of respondents say the private equity sector is becoming increasingly focused on speed and efficiency, two areas proven to benefit from advanced technology.
The report indicates technology is poised to solve a number of problems in due diligence. Thirty percent of respondents said technology will help address document self organization and project management, while 29 percent chose contract review, analysis and redaction. Another 20 percent said technology could help with predictive deal analytics, 12 percent said audit trails and regulatory readiness, and 9 percent said actionable benchmarks.
From this report, it’s clear due diligence can benefit from new tech solutions, but there are a number of other ways tech will shape the process moving forward. Here are three things you need to know about the future of due diligence.
The Merrill report specifically references the increasing role of cybersecurity in the due diligence process and the ways in which technology can help protect data. Eight percent of respondents in the poll said tougher data protection was the factor driving the most change in due diligence, and 14 percent said cybersecurity threats were the greatest obstacle to ensuring data protection and privacy during the deal process.
In the future, due diligence teams will begin to prioritize cybersecurity and data protection in their processes. They will integrate technology to better document and assess risks and to implement uniform cybersecurity procedures to ensure data is protected.
While AI is currently being applied to a variety of industries, it’s more than just a buzzword. AI can help due diligence firms automatically search unstructured documents and contracts and extract essential data. It can also help with privacy protection by redacting proprietary information and personal HR information.
Additionally, a study released by LawGeex, found that AI was better at finding loopholes and other risks in proposed non-disclosure agreements than well established due diligence professionals. The study found that lawyers took an average of 92 minutes to go over five contracts with an average 85 percent accuracy rate. Conversely, AI software took 23 seconds to review the contracts and was 94 percent accurate.
Overall, the future will see technology speeding up the due diligence process. Another Miller report, which included the results of a survey of 539 mergers and acquisitions professionals from Europe, Africa and the Middle East, found that technology has also started to cut the time required for the due diligence process for many in the industry.
According to the report, 70 percent of survey respondents reported that technology has sped up the process of reviewing and analyzing contract text. Additionally, 52 percent of survey respondents said technology has accelerated the time it takes them to run multiple scenario analyses and financial modelling; and 41 percent said technology has sped up the process for visualizing financial performance data. In the future, 32 percent of respondents said the ability to harness data analytics will accelerate the due diligence process the most.
At Treehouse Technology, we help firms harness the power of technology to streamline their processes and operate more efficiently. Contact us to find out how you can use innovative technology to revolutionize the due diligence process.