Artificial Intelligence and M&A: Efficiency Meets Ethics

By: Cole Hammel, Class of 2028

Overview

Mergers and acquisitions (“M&A”) are evolving rapidly in response to technological change. As transaction complexity and deal sizes grow, corporate law firms are turning to artificial intelligence (“AI”) tools to help with M&A due diligence, contract review, risk screening, and post-closing monitoring. The impetus is efficiency: what once required days or weeks of manual review can now be compressed into hours. For dealmakers and counsel, that means faster timelines, but also a growing expectation from clients that law firms will deliver insights at machine speed without sacrificing accuracy. However, the shift also introduces new legal, ethical, and regulatory risks, especially when deals span multiple jurisdictions and data regimes. In short, understanding how AI fits into M&A isn’t optional anymore, it’s becoming part of the standard of care.

In response, major professional and regulatory bodies are beginning to weigh in. In July 2024, the American Bar Association (“ABA”) released Formal Opinion 512, offering guidance on lawyers’ use of generative AI tools.[1] Meanwhile, in Europe, the EU AI Act, adopted in 2024, places obligations on “high-risk” AI systems and imposes administrative penalties that may reach up to EUR 35M or 7% of global turnover.[2] These rules are reshaping how firms structure cross-border deals, making AI literacy essential for both corporate and legal teams. For M&A involving AI or data-intensive targets, that means diligence must now include AI compliance checks, model audits, and transparency. Failing to do so can expose buyers to unexpected liabilities or reputational harm post-closing.

Recent market data underscores the trend. A 2025 Bain survey of more than 300 M&A practitioners found that 21% are already using generative AI in deals (up from 16% in 2023), illustrating that adoption is growing, though still in its early stages.[3] In parallel, Dentons reports that 64% of business leaders plan to use M&A to acquire AI capabilities in the coming year.[4] This signals a new kind of arms race where firms that understand AI not only close deals faster, but also help clients assess AI driven value and risk more intelligently. Dealmakers are leveraging AI not just as a tool for diligence, but as a strategic asset that demands careful use.

How AI Is Currently Being Used in M&A Due Diligence

Mergers and acquisitions are increasingly using AI to streamline due diligence, transforming a traditionally document heavy process into a faster, data-driven workflow.[5] AI tools now parse and benchmark thousands of contracts, flagging non-standard clauses across portfolios, while also scanning for regulatory, environmental, and compliance risks, creating a pre-deal “health check”.[6] This shift matters because it allows law firms to uncover risks earlier, close deals faster, and deliver more value to clients under tighter timelines. Additionally, law firms are increasingly leveraging AI throughout the M&A lifecycle, including for post-closing activities, using tools such as diligence automation and experience automation to monitor financials, compliance metrics, and operational performance, thereby helping to detect potential issues early.[7] In other words, AI is changing due diligence from a one-time event to an ongoing risk management function, giving both lawyers and clients greater visibility into deal health long after closing. These trends reflect a growing reliance on AI to inform strategic insights, deal timing, and potential pricing considerations.[8] Consequently, those who understand how to integrate AI responsibly will be better positioned to compete in an increasingly technology-driven deal environment.

Law firms are also experimenting internally. For instance, Troutman Pepper Locke has used AI to streamline internal merger processes.[9] In practice, AI has accelerated complex deals, such as Kraken’s $1.5B acquisition of NinjaTrader, where AI analyzed financial, legal, and operational data in hours instead of weeks.[10] Firms that can harness this kind of efficiency may gain a competitive advantage in both client acquisition and deal turnaround. As AI adoption deepens, it is becoming a core tool in the M&A toolkit, enhancing speed, breadth, and consistency in deal execution.

Ethical and Regulatory Considerations for AI in M&A Due Diligence

As law firms increasingly integrate AI into M&A due diligence, ethical and regulatory obligations remain critical. The ABA Model Rules require attorneys to maintain competence, protect client confidentiality, and supervise subordinate lawyers and nonlawyer assistants who may use AI systems in transactional work.[11] Specifically, Commentary to Rule 1.1 imposes a duty of technological competence, which extends to understanding the capabilities and limitations of AI tools employed for contract review, data extraction, and risk identification.[12] Put simply, lawyers who use AI without understanding how it works risk falling short of the competence standard itself. Rule 1.3 further requires diligence, meaning lawyers must actively oversee AI-assisted work to ensure tasks are completed promptly, accurately, and thoroughly, rather than relying blindly on automated outputs.[13] Rule 1.6 mandates that lawyers safeguard client information, meaning that AI platforms handling deal documents must comply with strict confidentiality requirements.[14] Rule 5.1 further obligates supervising attorneys to ensure that anyone using AI tools is properly guided and that outputs are verified before client reliance.[15] These provisions matter because they define where efficiency ends and ethical accountability begins, reminding lawyers that technology can enhance but never replace the lawyer’s professional duty.

The Pennsylvania Bar Association reinforced these principles in Joint Formal Opinion 2024-200 (the “Opinion”), emphasizing that attorneys cannot delegate ethical responsibilities to AI alone.[16] The Opinion notes that lawyers must actively verify AI outputs and understand their implications before incorporating them into legal advice or deal decisions.[17] This guidance is a reminder that AI should support, not replace, legal judgment. This approach ensures that AI adoption enhances efficiency without compromising professional accountability or due diligence standards.[18]

While the United States currently lacks comprehensive federal legislation specifically governing AI, recent developments suggest that regulatory action may be forthcoming. The White House’s ‘Removing Barriers to American Leadership in AI’ order revokes prior AI policies that impeded innovation and directs federal agencies to align regulations.[19] This signals a federal pivot toward both innovation and accountability, meaning law firms must be prepared to advise clients on a fast-evolving compliance framework. In Congress, bipartisan efforts such as Senator Josh Hawley and Senator Richard Blumenthal’s ‘AI Risk Evaluation Act’ would require developers of advanced AI systems to undergo federal risk assessments and obtain approval before public deployment, reflecting growing consensus on the need for proactive oversight.[20] For M&A professionals, this could soon make AI governance and disclosure a standard part of due diligence, much like cybersecurity or data privacy today. At the state level, California enacted Senate Bill 53, known as the ‘Transparency in Frontier AI Act’, requiring developers of frontier AI models to publish a public transparency framework describing their safety policies and updates, and to report critical safety incidents to the state within 15 days.[21] Collectively, these initiatives illustrate an emerging legislative environment in which broader federal and state AI regulation may follow. For the legal profession, the takeaway is clear: staying informed on AI legislation is no longer optional, it’s becoming essential to competent representation in corporate transactions.

Cross border regulations also impose constraints on AI use in M&A. As AI tools become embedded in due diligence and data analysis, firms can no longer assume that software automatically complies across borders, every transfer of data or model output can carry regulatory consequences. The European Union (“EU”) General Data Protection Regulation (“GDPR”) imposes limitations on the processing and cross-border transfer of personal data. It requires entities that process data of EU residents data, including AI tools when applicable, to comply with privacy principles such as transparency, fairness, security, and accountability.[22] Similarly, the U.S. Export Administration Regulations (“EAR”) restrict the international sharing of software and datasets, including AI tools, by considering the release of controlled technologies to foreign persons as “deemed exports,” which may require a license and affect how AI platforms are deployed in cross-border deals.[23] In practical terms, this means that using AI hosted on overseas servers, or sharing models with non-U.S. affiliates, can create export control risks that delay or complicate a transaction if not carefully managed.

Recent guidance from the U.S. Department of Commerce’s Bureau of Industry and Security has published an interim final rule clarifying that the EAR’s restrictions also apply to foreign affiliates that are majority-owned by restricted parties. This means that AI operations with such affiliates must carefully track international sharing to remain compliant.[24] For multinational clients, that oversight isn’t just a legal formality, it’s a business necessity to prevent deal interruptions or penalties. Additionally, the EU AI Act (2024) imposes transparency, auditability, and human oversight requirements on high-risk AI systems, impacting both pre-closing diligence and post-closing monitoring activities.[25] For global law firms and corporate counsel, staying ahead of these overlapping regimes is essential to avoiding regulatory missteps that could delay or derail a deal.

Conclusion

In conclusion, AI is transforming M&A due diligence by accelerating analysis and highlighting risks more efficiently than ever. For law firms and deal teams, this shift isn’t just about technology, it’s about redefining what effective, timely, and client-centered representation looks like in a data driven market. Yet, lawyers must exercise judgment, verify AI outputs, and navigate a complex and evolving web of domestic and international regulations. Those who treat AI as a trusted assistant rather than a replacement for professional reasoning will be best positioned to maintain credibility and compliance. Success requires integrating compliance and ethical checks directly into AI workflows, ensuring that speed and efficiency do not come at the expense of professional responsibility or legal compliance. Ultimately, the firms that balance innovation with accountability will gain a strategic edge, delivering faster insights, mitigating risk, and earning client confidence in an era where AI competence is quickly becoming a marker of legal excellence. By striking this balance, M&A teams can harness the full potential of AI while upholding the standards essential to the practice of law.

[1] See Am. Bar Ass’n, Standing Comm. on Ethics & Prof’l Responsibility, Formal Opinion 512: Generative AI Tools (July 29, 2024), https://www.lawnext.com/wp-content/uploads/2024/07/aba-formal-opinion-512.pdf. 

[2] See CMS Legal, The Impact of the AI Act on Tech M&A Due Diligence (June 13, 2024), https://cms.law/en/nld/publication/the-impact-of-the-ai-act-on-tech-m-a-due-diligence. 

[3] See Bain & Company, Generative AI M&A Report 2025 (Feb. 4, 2025), https://www.bain.com/insights/generative-ai-m-and-a-report-2025/. 

[4] See Dentons, AI Trends for 2025: M&A and Investments (Jan. 10, 2025), https://www.dentons.com/en/insights/articles/2025/january/10/ai-trends-for-2025-m-a-and-investments. 

[5] See GK Network, “Using AI in Due Diligence for M&A Transactions” (Aug. 1, 2025), https://gknet.com/news/publications/using-artificial-intelligence-in-due-diligence-for-ma-transactions/. 

[6] Id.

[7] See Litera Corp., M&A in the AI Era: Future Trends in Deal Making Tech (2025), https://info.litera.com/rs/046-QLX-552/images/Tech%20in%20M%26A%20Survey%20PRGM_Report%20%283%29.pdf?version=0.  

[8] See Datasite, Expert Spotlight: AI’s Impact on M&A in the Legal Sector (Mar. 11, 2025), https://www.datasite.com/en/resources/insights/expert-spotlight-ai-impact-on-m-and-a-in-the-legal-sector?utm_source=chatgpt.com;%20https://www.thomsonreuters.com/content/dam/ewp-m/documents/thomsonreuters/en/pdf/reports/future-of-professionals-report-2025.pdf; see also Thomson Reuters Institute, Future of Professionals Report 2025, https://www.thomsonreuters.com/content/dam/ewp-m/documents/thomsonreuters/en/pdf/reports/future-of-professionals-report-2025.pdf. 

[9] See Troutman Pepper Locke, How Troutman Pepper Locke Used Gen AI to Streamline Its Firm Merger Process (May 2, 2025), https://www.troutman.com/insights/how-troutman-pepper-locke-used-gen-ai-to-streamline-its-firm-merger-process/. 

[10] See Termina, Supporting Kraken’s $1.5B Acquisition of NinjaTrader with Diligence AI (Mar. 20, 2025), https://www.termina.ai/news/ninjatrader-acquisition. 

[11]See Am. Bar Ass’n, Model Rules of Professional Conduct: Table of Contents, https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/model_rules_of_professional_conduct_table_of_contents/. 

[12] See Am. Bar Ass’n, Model Rules of Professional Conduct R.1.1, cmt, https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_1_competence/comment_on_rule_1_1/.

[13] See Am. Bar Ass’n, Model Rules of Professional Conduct R.1.3, cmt, https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_3_diligence/comment_on_rule_1_3/. 

[14] See Am. Bar Ass’n, Model Rules of Professional Conduct R. 1.6, cmt, https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_6_confidentiality_of_information/comment_on_rule_1_6/.

[15] See Am. Bar Ass’n, Model Rules of Professional Conduct R. 5.1, cmt, https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_5_1_responsibilities_of_a_partner_or_supervisory_lawyer/.

[16] See Pennsylvania Bar Ass’n Comm. on Legal Ethics & Prof’l Resp. & Phila. Bar Ass’n Prof’l Guidance Comm., Joint Formal Opinion 2024-200: Ethical Issues Regarding the Use of Artificial Intelligence (May 22, 2024), https://www.lawnext.com/wp-content/uploads/2024/06/Joint-Formal-Opinion-2024-200.pdf. 

[17] Id. 

[18] Id. 

[19] See White House, Removing Barriers to American Leadership in Artificial Intelligence (Jan. 23, 2025), https://www.whitehouse.gov/presidential-actions/2025/01/removing-barriers-to-american-leadership-in-artificial-intelligence/; see also https://www.hawley.senate.gov/hawley-blumenthal-introduce-bipartisan-ai-evaluation-legislation-to-put-americans-first/?utm_source=chatgpt.com.

[20] See Josh Hawley, Hawley, Blumenthal Introduce Bipartisan AI Evaluation Legislation to Put Americans First (Sept. 29, 2025), https://www.hawley.senate.gov/hawley-blumenthal-introduce-bipartisan-ai-evaluation-legislation-to-put-americans-first/. 

[21] See Cal. S.B. 53, 2023-2024 Reg. Sess. (Cal. 2024), https://legiscan.com/CA/text/SB53/id/3270002. 

[22] See Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of Natural Persons with Regard to the Processing of Personal Data and on the Free Movement of Such Data (GDPR), consolidated version as of 4 May 2016, 2016 O.J. (L 119) 1, https://eur-lex.europa.eu/eli/reg/2016/679/oj. 

[23] 15 C.F.R. § 734.13 (2025), https://www.ecfr.gov/current/title-15/subtitle-B/chapter-VII/subchapter-C/part-734/section-734.13.

[24] See Anthony Rapa & Rachel Evans, BIS Adopts Long-Awaited Affiliate Rule (Oct. 7, 2025), https://www.linkedin.com/pulse/bis-adopts-long-awaited-affiliate-rule-blank-rome-llp-wmthe/. 

[25] See Proposal for a Regulation of the European Parliament and of the Council Laying Down Harmonised Rules on AI (AI Act) and Amending Certain Union Legislative Acts, COM/2021/206 final (Apr. 21, 2021), https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52021PC0206.