{"id":55109,"date":"2023-08-30T23:37:33","date_gmt":"2023-08-31T03:37:33","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/build-partner-and-buy-ai-and-the-new-ma-model\/"},"modified":"2023-08-30T23:37:35","modified_gmt":"2023-08-31T03:37:35","slug":"build-partner-and-buy-ai-and-the-new-ma-model","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=55109","title":{"rendered":"‘Build, Partner And Buy’: AI And The New M&A Model"},"content":{"rendered":"
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Amid the current artificial intelligence (AI) hype cycle, companies are jockeying for an edge in this fast-developing sector.<\/p>\n

So far this year, software M&A is staging a comeback. After bottoming out in the fourth quarter of 2022, it has accounted for more than 600 deals in the first quarter of 2023 as larger, deep-pocketed firms invest, partner, or simply mop up smaller, private, venture-backed companies.<\/span><\/p>\n

While these investment dollars are still a drop in the bucket relative to the dry powder in private equity and corporate coffers, serial acquirers are looking for opportunities to increase their capabilities.<\/p>\n

Nevertheless, the M&A playbook has changed.<\/p>\n

Mega deals face a complicated regulatory environment in Europe and North America. As such, Microsoft (MSFT), Brookfield (BAM), Thomson Reuters (TRI), and other mega-cap serial acquirers have adopted a more nuanced AI-focused strategy: To quote Steve Hasker, president and CEO of Thomson Reuters, they are looking to \u201c<\/span>build, partner and buy.\u201d<\/span><\/p>\n

Enghouse (OTCPK:EGHSF), Constellation Software (OTCPK:CNSWF), Brookfield, and Thomson Reuters are all among the firms funding or acquiring AI start-ups.<\/p>\n

Earlier this year, Brookfield Growth, Brookfield\u2019s technology investment arm, invested in contract lifecycle management (CLM) firm SirionLabs; Thomson Reuters acquired Casetext, an AI-powered legal start-up that recently launched CoCounsel, an \u201cAI-legal assistant\u201d; and the finance automation platform Ramp purchased Toronto-based Cohere.io.<\/p>\n

Other large deals include the data-management company Databricks’s US$1.3 billion purchase of MosaicML, a generative AI start-up whose technology enables businesses to create propriety versions of OpenAI\u2019s ChatGPT.<\/p>\n

Today\u2019s AI-driven technological disruption recalls the frenetic innovation of the early-pandemic era. Amid lockdowns, work from home (WFH), and contact-free shopping, businesses needed to quickly acquire the tools to transact and compete in the new environment. This spurred robust M&A activity as businesses sought out the right technology and talent.<\/p>\n

Today, a new M&A cycle has developed, as companies that cannot build such capacities in-house seek to acquire them through investments, partnerships, or old-fashioned M&A.<\/p>\n

How the New M&A Playbook Boosts Incumbents<\/h3>\n

AI has added sizzle to somewhat staid incumbents. Microsoft and Google (GOOG) (GOOGL) are both sprinting to the front of the line through multi-year partnerships and investments in AI start-ups.<\/p>\n

Google invested US$300 million in Anthropic, and Microsoft spent US$1 billion on OpenAI. And, in a virtuous circle of revenue upcycling, such tech giants also earn \u201ccash back\u201d through the recurring revenues they generate from the very same start-ups.<\/p>\n

How? By providing cloud-based services, access to super-computing power, and other types of resources that AI requires in vast quantities.<\/p>\n

By partnering with but not necessarily acquiring these emerging young companies (yet), incumbents can sidestep thorny regulatory issues while leveraging the new technology to further reinforce their positions.<\/p>\n

They can accelerate their AI facility without the drags associated with M&A integration, such as legal work, data migration, contract and team management, and cultural fit.<\/p>\n

In another example of how the emerging ecosystem benefits incumbents, when the time comes for acquisitions, AI can help facilitate transactions. M&A deals require vast, resource-intensive efforts, and AI can help optimize each step of the transaction.<\/p>\n

Whether it is deal sourcing, due diligence, risk assessment, deal structuring and valuation, or post-merger integration, AI is rapidly becoming an essential M&A tool.<\/p>\n

Disclaimer:<\/strong> Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.<\/em><\/p>\n

Original Post<\/em><\/p>\n

Editor’s Note:<\/strong> The summary bullets for this article were chosen by Seeking Alpha editors.<\/p>\n

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Amid the current artificial intelligence (AI) hype cycle, companies are jockeying for an edge in this fast-developing sector. So far this year, software M&A is staging a comeback. After bottoming out in the fourth quarter of 2022, it has accounted for more than 600 deals in the first quarter of 2023 as larger, deep-pocketed firms […]<\/p>\n","protected":false},"author":1,"featured_media":20923,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-55109","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\n'Build, Partner And Buy': AI And The New M&A Model | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Amid the current artificial intelligence (AI) hype cycle, companies are jockeying for an edge in this fast-developing sector. 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