Due Diligence in the New World –
AI and Automation in the Post-Covid Era
The COVID pandemic has changed the professional landscape in many ways. From shifts in work culture to changing investment markets, the Corona pandemic has created new considerations for private equity firms. Due diligence has emerged as a key consideration in any dealmaking. Simultaneously, an increased pool of available data has made performing due diligence more challenging, just as rising fraud highlights its vital importance.
Looking to the post-pandemic world, we examine the role that due diligence plays in private equity dealmaking and how AI-based automation can streamline the process while increasing accuracy.
The second half of 2020 saw private equity deal-making bounce back to approximately US$582 billion, reaching the highest level since 2007.
57% of respondents considered checks the most important factor of their qualitative due diligence.
* survey from Evestment in conjunction with NASDAQ
The importance of in-depth Due Diligence
Placing your investment future in the hands of individual players requires a significant level of trust. Ensuring that those fund managers are worthy of that trust is to the essence of due diligence. The importance of thorough background checks is acknowledged throughout the industry.
Management Research Review highlighted the need for in-depth screening, advising companies to go beyond basic methods as early as 2010. This advice has been readily adopted by the private equity investment community. Failure to perform full due diligence has been shown to hamper smooth company acquisition.
AI is the future of Due Diligence
Just as the need for in-depth, nuanced due diligence reports is increasing, artificial intelligence enhanced due diligence reports promise to provide a new standard in due diligence. By providing human analysts with interpreted data that both pulls from the entire pool of information available on an individual and provides a context for reviewing that data, AI offers an unsurpassed level of accuracy in due diligence reports. Any private equity investment firm will be wise to incorporate it into their standard due diligence procedures.