How Artificial Intelligence can help during the Due Diligence process for Mergers & Acquisitions Complimentary ebook offered by
THE CHALLENGE WITH EVERY M&A PROCESS: FINDING RELEVANT INFORMATION In all complex corporate transactions, parties need to find the information relevant to the transaction. The relevant documents may be stored in multiple unknown locations and may contain important information that is not immediately clear. These documents need to be found under great time pressure. Errors or missed documents have major financial consequences. SO WHERE IS THAT INFORMATION HIDDEN? In all kind of reports; In company agreements and employee contracts; In rental, sales and lease contracts; In credit agreements, proof of ownership documents, guarantees, property collaterals; In maintenance documents and many other relevant documents.
WHAT KINDS OF TRANSACTIONS ARE WE TALKING ABOUT? Traditional M&A; Real estate; Refinancing, fundraising, mortgage or securitization; Life Science & Pharmaceutical; Complex infrastructural projects; Complex technological real estate (i.e. boats, planes); Other processes like responding to additional information requests from regulators; proactive FCPA-research; storing the VDR for ESCROW purposes and the ability to access and search in that VDR after the deal.
THERE ARE MANY ASPECTS TO A M&A PROCESS Seperation ROT (Redundant, Obsolete & Trivial) Contract Discovery & Analysis Pre-Transaction Due Dilligence Red Flag Indication TAR (Machine Learning & AI) Data Room Preparation IP & Privacy Protection Blacklining / Auto Redaction M&A Buy Side / Sell Side Pre-Merger Notification & Second Request Verification of Reps & Warranties Common Reps & Warranties Litigation TAR (Machine Learning & AI) TAR (Machine Learning & AI) Post-Transaction Privacy Issues / GDPR Blacklining / Auto Redaction Integration Data Cleansing ROT (Redundant, Obsolete & Trivial)
YOU CAN NO LONGER DO THIS MANUALLY Too much data; You do not know what you find and what you miss; Too many (geographically dispersed) sources; It takes too long; Prone to errors; Boring and demotivating work.
WHEN JUST SEARCHING IS NO LONGER ENOUGH... You do not know exactly what to look for. It does not matter how good your query is; you get too many hits anyway. There is too much data that cannot be searched using textual queries. There are languages you do not speak. It is not always clear what is or what is not in a potential dataroom. Misspellings and variations, non-english names and slang cause additional problems.... ARTIFICIAL INTELLIGENCE COMES TO THE RESCUE
HOW CAN AI HELP IN M&A? Intelligent search Intelligent analysis of document content Identification and extraction of relevant information Classification of information Learning and storage of knowledge of contract clauses and typical due diligence problems (Machine Learning) Automatic translation Automatic identification and redaction of sensitive and personal data.
The M&A due diligence process
AUTOMATICALLY COLLECT INFORMATION FROM ITS ORIGINAL LOCATION
SHIFT AND FILTER AGREEMENTS FROM NON-AGREEMENTS
AUTOMATICALLY ANALYZE AND CLASSIFY THE CONTENT OF SPECIFIC CONTRACTUAL DOCUMENTS
ROI - CLASSIFICATION OF DOCUMENTS Manual classification of 15 categories: 1,500 to 2,000 hours Multiple reviewers over a longer period of time = less consistent result TAR-supported classification including manual check: 80 hours One reviewer for a short period of time = consistent result We used ZyLAB for a project where we needed to sell part of a large bank, including a portfolio of 1000+ loans. And we experienced it first hand: sometimes machines are faster, more accurate and more cost-effective than humans.
AUTOMATIC DOCUMENT ANALYSIS WHAT DOES IT SAY?
INTEGRATED MACHINE TRANSLATION
AUTOMATICALLY DETECT POTENTIAL DEAL-BREAKERS AND PROBLEMS (1)
AUTOMATICALLY DETECT POTENTIAL DEAL-BREAKERS AND PROBLEMS (2)
AUTOMATICALLY CLASSIFY DOCUMENTS IN VDR CATEGORIES
COMPLETING YOUR FILES A complete file contains: Credit Agreement Mortgage Deed Lease Agreement Valuation Report Missing: Credit Agreement
REPORTING AND CONTRACT SUMMARY REPORTS (1)
REPORTING AND CONTRACT SUMMARY REPORTS (2)
TECHNOLOGY ASSISTED REVIEW (TAR) (1) THE GOAL OF TAR Automatic document classification into responsive and non-responsive sets. Recall maximization: find 80% of all responsive documents quickly. Save tremendously on cost of legal review. Find relevant documents semi-automatically without depending on the search-skills of end-users. Find without knowing exactly what you are looking for. Automatically classify documents into conceptual categories.
TECHNOLOGY ASSISTED REVIEW (TAR) (2) Start with a simple full-text query Continuous Active Learning (CAL): Train ZyLAB TAR by reviewing a number of documents: Easy & Fast! ZyLAB TAR accomplishes a very high precision & recall result
ZYLAB TAR: DEFENSIBILITY ACCORDING TO US STANDARDS
REDACTION: PROTECTING IP, PII AND OTHER SENSITIVE INFORMATION Privacy Ethnic background, health information, religion, political preference, and other personal information. Personal Identifiable Information (PII) Name, addresses, data of birth, photos, phone numbers, etc. Commercially sensitive information * Privileged * Trade secrets * IP
REDACTION: PROTECTING IP
REDACTION: PROTECTING PII (BULK REDACTION)
ROI - REDACTION Manual digital redaction (blacklining): 1,800 hours * Multiple reviewers over a longer period of time = less consistent * Long turnaround time * High costs Automated redaction including 100% check: 700 hours Automated redaction including random check on 100 documents (~3%): 120 hours * Short turnaround time * Consistent and reproducible * Economically feasible Redaction is a critical aspect in our work. It s time consuming and errors can have serious consequences. Using the automated bulk redaction functionality in the ZyLAB software allows us to deliver high quality at a much faster pace. - Yasmina Ben Daoued, project manager Legadex -
BENEFITS FOR CORPORATE M&A - SELLING SIDE PRE-TRANSACTION Minimize liabilities and risks by increasing the accuracy of the extracted information; prevent human error and other potentially costly mistakes when preparing the data for a virtual data room or when implementing a vendor due diligence. Keep control over what goes into the virtual data room, address problems early in the process. Protect intellectual property, confidential information or privacy sensitive information by (auto) redaction and the use of pseudonyms, but keep the flexibility to disclose information in other phases of the M&A process. POST-TRANSACTION Keep a searchable and fully analyzed copy of the Virtual Data Room for reference in case of future questions or disputes.
BENEFITS FOR CORPORATE M&A - BUYING SIDE PRE-TRANSACTION Support due diligence process with advanced analytics and search in the event that a (strategic) buyer can download data from the virtual data room. Automatically create large parts of the contract summary and due diligence reports. Minimize liabilities and risks by increasing the accuracy of the extracted information; prevent human error and other potentially costly mistakes. Achieve a faster and more cost effective proactive audit related to potential violations of FCPA, export control or if responding to additional regulatory requests when seeking permission to merge. Quickly and easily, prepare documents for initial filings and to answer second requests related to obtaining permission to merge from regulators. POST-TRANSACTION Improve the overall post-transaction integration process by the unsurpassed access of information and the accuracy of all extracted information. Overall improvement of the process for the verification of representations and warranties by also including other data. Support for data migration processes supporting the overall integration process.
BENEFITS FOR LAW FIRMS Quickly identify exactly where relevant documents are located and what content they contain. This enables you and your client to close the deal faster, with less risk and more revenue. Improve accuracy and efficiently in a team with your colleagues and your client; speed up the process, increase client value and stand out from the competition. Ensure you employ the most efficient way to respond to regulatory requests when your client seeks permission to merge or has to implement a proactive FCPA investigation. Keep your junior lawyers happy by sparing them boring, highly demotivating manual review and redaction work.
ZYLAB DELIVERY MODELS & LICENSES ZyLAB One integrated platform for more than just M&A Intellectual Property On-premises Litigation Corporate Law SaaS / Azure / Private Cloud Dispute Resolution Commercial Law Licenses * Perpetual * Volume based ediscovery Regulatory Requests Competition Financial Markets * Project * Subscription Environmental * # of Reviewers Internal Investigations Fraud Investigations Fraud Detection
ZYLAB COMPETITIVE COMPARISON Advanced full-text search Natural language processing Entity detection and extraction Paragraph detection and extraction Contract Summary Reports Red-flag detection Easy detection of omissions and errors Production to popular VDR formats Auto-redaction Collaboration tools Work distribution tools Advanced production Import and export from and to other industry standard ediscovery formats Special support for anti-trust, bribery, fraud, international litigation and other ediscovery use cases M&A ediscovery AI Machine translation Audio search Machine learning Topic modeling Hierarchical clustering Text-mining Advanced full-text search Data normalization Data visualizations Legal Hold Direct collection from file shares, email (O365), Share- Point and many more Deep processing (unpack PST, NSF, ZIP, objects in MS-Office documents and other compound formats) Automatic OCR of (embedded) bitmaps and non-searchable PDFs User friendly review including several review accelerators
ZyLAB ONE ediscovery ZyLAB ONE ediscovery uses the latest Artificial Intelligence and Data Science tools to accelerate truth finding missions along the typical dimensions Who, When, Where, Why, What, How, and How Much. ZyLAB is positioned as leader in Gartner s latest Magic Quadrant for ediscovery Software, ranked #1 for complete EDRM ediscovery in Gartner s Critical Capabilities for E-Discovery Software report and has received numerous other industry accolades over the last three decades.