AI implementation and due diligence has drastically shifted in the last two years. M&A processes may have simply asked if a company used AI two years ago, but now due diligence processes in dealmaking go much deeper.

According to Sinan Erhan, a partner and head of UK at OMMAX, commercial diligence in dealmaking has shifted to AI-specific diligence. Erhan joins Mergermarket’s executive editor, Lucinda Guthrie, to discuss the disconnect between AI valuations and the reality assessed through the diligence process.

The two delve into what makes a company’s AI usage truly valuable. For instance, whether a company is using AI at the disparate, individual level or whether it is an integral part of the workflow. It is also important to assess whether the company has a defensible moat for their AI services through IP or other practices or if they are simply integrating publicly available agents like Claude or ChatGPT, and whether having proprietary data is enough when it may still have to be cleaned and sorted  before applying an algorithm. And although AI may be freeing up hours, can a company explain how they are now optimizing the newly available time?

Beyond what makes a company’s AI story strong in reality, Erhan discusses how firms are using AI to make their research more efficient, assess potential M&A targets, and why that process still requires the human touch. He explains why juniors at firms, and even students, may need to be trained on how to make the right judgement calls on research AI presents to them, as the near future will likely lead to standardization of AI-specific diligence in the dealmaking process.