AI in Corporate Advisory – investment, M&A and transaction services
For corporate finance advisers, AI presents many exciting opportunities to increase efficiency, reduce costs and create new services.
But given corporate deal-making’s complexity and economic importance, careful thought is needed about how best to combine human expertise with this transformative new technology. The Corporate Finance Faculty convened an expert group to investigate how the sector can ready itself for the Age of AI.
The ICAEW has also been working with the All-Party Parliamentary Group on Artificial Intelligence (APPG AI) to address the big public-policy, financial and practical implications of AI for corporate decision-making and investment. This included a joint online Evidence Meeting on the subject on 11 May 2020.
You can watch a recording of the Evidence Meeting here: APPG AI Evidence Meeting: Corporate Decision-making and Investment, 11 May 2020.
You can read here: the Parliamentary Briefing: Corporate Decision-making and Investment: best practice guidelines for AI adoption.
In July 2021, the Tech Faculty and the Corporate Finance Faculty responded to the UK government’s survey about the National AI Strategy: ICAEW Representation 60/21.
The Corporate Finance Faculty also contributed expertise to the Department for Digital, Culture, Media & Sport and the Office for AI report Understanding UK AI R&D commercialisation and the role of standards, which was published by DCMS and the Office for AI in May 2022.
AI’s impact on corporate finance
The impact of artificial intelligence (AI) on finance and business will be profound. For some years the Corporate Finance Faculty has been tracking the application of AI to ‘big data’ in corporate transactions.
In 2019, our publication “AI in Corporate Advisory” accurately forecast that AI would have a huge influence on how professional services firms advise their clients in the future. The Covid 19 pandemic and lockdown in 2020 accelerated our predictions and led to massive change in ways of working and analysing deals. The application of AI has now become established in corporate finance departments, investment banks and the corporate divisions of law firms, and there are likely to be further big changes over the next five to ten years.
The global importance of corporate finance
The application of AI to corporate finance is extremely important. Corporate finance investment and transactions are a major form of business activity that has a significant impact on industry sectors, national and regional economies, and, therefore, on broader society.
Corporate finance, as it is defined in countries such as the UK, includes raising start-up and venture capital, growth capital, mergers and acquisitions (M&A), management buyouts (MBOs) backed by private equity, equity capital markets and initial public offerings (IPOs), raising debt and alternative finance, capital for specialist investment funds, infrastructure investment, and turnaround finance.
There is great public interest and potential economic benefit in ensuring effective and responsible corporate finance for business innovation; in order to engage with new markets, new technologies, new deals and new ventures, companies need to access equity capital, debt and alternative finance. And M&A – worth a total of $4trn globally in 2018, according to Refinitiv – is one way that companies grow and change.
About this report
In this report, we have focused on the practical opportunities and risks arising from AI for those involved in corporate finance transactions, including advisers and their client companies and investors.
We ask how AI technologies might augment the existing business models of advisory firms and, in some cases, create new business models. We have looked in depth at the UK in particular, but with a view to the potential global implications of these new technologies. We believe that this report contains lessons for people working around the world.
The structure of this paper
| Chapter 1 | Chapter 2 | Chapter 3 |
|---|---|---|
| We outline the international context of the development of AI, including the new opportunities - and potential risks - AI is creating across societies and economies. | We consider questions of ethics, regulation and the new protocols that are now being developed in business and finance. | We assess the rapid introduction of AI-based applications in professional services, focusing on accountancy and law. |
| Chapter 4 | Chapter 5 | Chapter 6 |
| We look in depth at how AI could be applied to corporate advisory (generally known in the UK and some other countries as 'corporate finance') to support decision-making and risk management in major M&A, company investment and capital markets transactions. | We assess some of the venture investment made so far by professional services groups in nascent AI-based technologies. | We make a few, tentative predictions about how corporate advisory might develop over the next few years, as AI becomes much more significant. We also suggest what that could mean for those organisations, including ICAEW, that provide professional qualifications, training and CPD support. |
To find out more about the latest AI development in corporate advisory and about how the sector can best prepare itself for AI's future impact, read the full paper.