Boosting M&A with AI

M&A has formed a key component of the success of Inflexion’s portfolio since inception in 1999. Doing so requires great resource, from originating to negotiating to integrating. Fortunately, technology is helping part of this process.

While data has long been crucial for business activities, overlaying advanced technology is boosting human efforts on M&A. Two years ago, artificial intelligence was integrated into Inflexion’s origination efforts, driving smarter decision-making and accelerating the deal-making process. The efforts are paying off, with approximately 40% of potential opportunities viewed within Inflexion’s AI-powered tool ‘Tearsheet’ before they enter into the firm’s CRM. Over the last 12 months, more than 200 companies have been added to the firm’s CRM, highlighting the tool’s effectiveness in casting Inflexion’s deal-sourcing net wider.

“AI is proving hugely beneficial for laying the foundations for our M&A work, creating longlists for analysts and angles for our campaigns. It is creating efficiencies which allow our team to connect with the right people and devise the right angles faster, since people are crucial to success of any M&A,” says Andrew Priest, Partner and Head of Origination at Inflexion.

Artificial intelligence, real benefits

The first step in harnessing AI well is establishing robust data.

“This foundation is crucial for creating comprehensive datasets that AI can analyse, ensuring accurate and meaningful outputs,” explains Jan Beitner, Director in Inflexion’s Value Acceleration team focused on Data & AI.

With the data in place, AI is supporting Inflexion’s M&A efforts. Tearsheet acts as a centralised repository aggregating decades of work with data from various external providers of financial and alternative data, internal intelligence from meetings and conversations with experts, and documents and information from the CRM. This enhances team collaboration and decision-making as it democratises access to the information rather than having gatekeepers guard information flow. “This is a differentiator as it eliminates bottlenecks driving efficiencies and enables effective monitoring of targets,” Jan explains.

The entire investment team is encouraged to use Tearsheet to identify companies based on specific criteria such as headcount, financials, with the in-house tool canvassing around 700,000 companies covering virtually all possibly relevant deal or bolt-on targets across the UK and Europe.

“AI is really helpful for finding niche companies, especially when sector classifications aren’t clear. It understands what you’re looking for, moving beyond simple keyword searches to deliver more nuanced results,” Jan notes.

This makes it an excellent tool for buy-and-build strategies when fragmented markets often mean a disparate and numerous group of businesses which can be tricky to pinpoint.

Finally, AI is helping Inflexion to enhance knowledge sharing. The firm utilises an internal version of ChatGPT integrated with their data and document systems providing access to various data sources, including records of expert calls, allowing the team to more effectively search and analyse their internal knowledge base. This capability is especially useful for developing strategic angles and identifying potential opportunities.

“This internal ChatGPT helps us to quickly access this wealth of knowledge, enabling us to build stronger cases for potential deals,” explains Jan. “AI helps us target our approach, driving fast, more focused and informed decision-making, but ultimately our team continues to drive the approaches.”