JPMorgan global M&A head discusses how AI is transforming deal-making, while also expressing concerns about disruption.

The emergence of AI enthusiasm in the economy in 2023 has encouraged several buyers, particularly in the large-cap tech and venture capital sectors. However, this technology can also have a negative impact on M&A, as deal-makers may become hesitant to make purchases due to the fear that the assets they acquire could be disrupted.

Anu Aiyengar, global head of M&A at JPMorgan, stated in an interview with CNBC that if one were to join the investment committee of a private equity firm, they could discuss any business and he could argue that it would be disintermediated by AI, the internet, or something else, and provide a reason not to invest. A lot of people do not want to analyze the impact it would have on their business, making it difficult to answer.

(See the full interview with Aiyengar above.)

Aiyengar claims that in many boardrooms, the calculation involves considering whether it is more advantageous to make deals now or to wait and search for something with improved capabilities that is cheaper, faster, or better.

Aiyengar stated that the uncertainty surrounding the ultimate impact of artificial intelligence is one of the unknowns adding to the uncertainty element in M&A.

The decline in M&A transactions worldwide this year, through October, is 21% lower than the previous year, according to LSEG. This year's slump is due to lower deal volumes in 2021, which set a record.

‘Know the least and talk the most’

According to Aiyengar, the modest 2023 activity can be attributed to the difference between seller price expectations and buyer willingness to pay, as well as other factors such as inflation, interest rates, changing consumer behaviors post-Covid, geopolitical events, worldwide elections in 2024, and antitrust scrutiny.

Aiyengar stated that AI adds to the uncertainty puzzle that buyers must consider when assessing a transaction.

She remarked that the topic of AI is the one we are least knowledgeable about yet we tend to discuss it the most.