Streamline your due diligence in M&A with Document Intelligence

Chris O’Leary

Legal professionals have only so many hours in the day. Too often, they devote many of them to paperwork. Getting bogged down in analyzing documents consumes a lawyer’s valuable time. When an attorney spends weeks in a deal room poring over paperwork and searching by eye for potentially risky clauses, they’re less able to provide value-added services to their clients, such as offering big-picture advisory and risk assessments.

Given that document verification is commonly a junior attorney’s task, having too exhausting a workload increases the chances that your firm’s most promising up-and-coming talent could burn out.

Document Intelligence is one way to change the game. By employing artificial intelligence (AI) techniques in document analysis, law firms are able to conduct due diligence reviews more efficiently — going at a much faster pace, yet with a lower risk for error.

Reducing workloads is only the beginning. Drawing on AI analysis also sharpens a lawyer’s perspective. AI software may discover things that a manual document review might have overlooked. Using AI, lawyers can classify documents in more innovative ways and use them to tell a more informed story to clients, offering next-level advice about a deal or financing.

Re-imagine streamlined due diligence in M&A deals

By using Document Intelligence, a law firm can fundamentally rethink the due diligence for M&A. Here’s how it works.

Accelerated document review

One of AI’s greatest abilities is its ability to rapidly analyze, categorize, and flag documents, even if they total in the thousands or millions.

Too often, attorneys begin work on a transaction and contend with a heap of unclassified documents put into a virtual data room. It’s difficult to decide where to begin; there could be duplicates or illegible documents that need to be re-scanned. Lawyers have to keep track of all this with checklists for M&A, while at the same time trying to classify documents by assigning them to various folders.

Document Intelligence analyzes documents in part by using segmentation algorithms. The AI software perfectly suited for M&A due diligence will scan a document and rapidly note — and index — all pertinent information, making it easily accessible later.

Do you need to perform a bulk review of assignment and change of control clauses? With a click of a button, there they are: ranked by origination date, monetary amount, term length of non-compete, and various other factors. Even if the term itself was not explicitly searched, AI-powered Document Intelligence will surface related information based on content and intent.

Value from day one

Law firms need the benefits AI can provide to minimize risk and “get the deal done” faster for their clients. While there are many AI contract review solutions on the market today, the biggest complaint is that they take months to implement and require extensive configuration and service costs.

One way a law firm can reduce time to value is to employ pre-built AI models that require no formal user training. Their strategy allows them to differentiate from the competition in both talent and client acquisition, without spending their valuable time on training AI models.

Exposing critical information

When conducting manual due diligence, lawyers are limited in how thoroughly to review a document pile, particularly if there are thousands of contracts to get through. Deadlines are deadlines, after all.

To complete diligence more quickly, deal teams will often set parameters as to which documents aren’t considered material to a transaction. For example, this could be a contract value that’s under a specified dollar amount or one which appears to have a marginal impact on the transaction in question.

The problem is that such materiality standards are often applied with too broad of a brush. Buried within a contract might be an exclusivity provision or non-compete clause that could represent a substantial risk to a deal. Having artificial intelligence conduct deep scans of all documents in a deal room, regardless of their purported materiality, can turn up potential surprises.

Extend value with HighQ

Law firms can integrate Document Intelligence with HighQ so attorneys can access whatever information they need via one system they may already know. For example, HighQ AI Hub will provide a single integration point and an easy-to-use interface. Using HighQ iSheets, a lawyer can quickly create data visualizations, workflows, risk evaluations, and more for use in deal negotiations.

Here’s an example: if a client needs to assess the risk of potentially acquiring a biotech startup, they can use the combined power of HighQ and Document Intelligence to quickly sift through the target’s essentials, including its patents, trademarks, client contracts, employee contracts, and usage agreements. Then, they can create a series of easy-to-read charts to break down any red flags found in the document review.

After creating these charts listing red flags by category — employment contracts, non-compete agreements, ongoing patent litigation, etc. — they can then stratify each “red flag” category by different probabilities: low risk, medium risk, and high risk. If the biotech startup turns out to have a large number of red flags indicating weak protection of its intellectual property, that information is vital for a potential buyer to know before going through with the deal.

Start a new era of M&A due diligence

Due diligence, all too often, is a time-consuming effort that weighs down a deal’s progress and wears down attorneys. By using Document Intelligence, a law firm can modernize its due diligence processes into a refined, value-added service.

Re-imagine the M&A due diligence process

Manage complexity and close deals faster with Thomson Reuters Document Intelligence