Navigating Change: The Impact of AI on CEE Dealmaking

The artificial (AI) revolution has opened many channels for discussion, including the impact it will have on mergers and acquisitions (M&A).

At SS&C Intralinks, we have been investing in AI, including large language models (LLMs) and bidirectional encoder representations (BERT), for over five years. Understanding the needs of dealmakers is key to the work we do to continuously deliver technology that can enable key activities of the M&A process to be executed better and faster.

Soon we are bringing to market the only AI-powered dealmaking platform that transforms every phase of the transaction lifecycle. Built from the ground up, DealCentre AI incorporates artificial intelligence throughout to revolutionize the way deals are done — you can read more about it here.

In January, we surveyed close to 100 M&A professionals in the CEE region to gauge current market sentiment. The questions were designed to better understand the sentiment on AI technology within the dealmaking ecosystem. The following conclusions were drawn:

1. Nearly 60 percent of respondents expect AI technology to boost technology, media and telecom (TMT) deal flow more or significantly more in 2024–25 than in 2023.
2. 36 percent of respondents stated there is an AI valuation bubble in CEE.
3. Over 60 percent of the respondents already use AI technology as a tool to support their due diligence work.
4. Almost 70 percent agree that AI will have a significant impact as a tool to support due diligence work within the next 24 months.

A more in-depth view of these statistics can be found here.

While the technology is still in its infancy, there is a high expectation among the dealmakers we surveyed for AI to positively impact deal flow and the automation of due diligence activities.

To understand in more depth the opinions of market participants, we conducted interviews with three experienced dealmakers in the CEE region: Ileana Glodeanu, partner at Wolf Theiss in Romania; Jorge Abugaber, managing partner at Carlsquare in Poland; and Tomasz Danis, founder and managing partner at AVIVO Capital in Poland.

Ileana Glodeanu, Wolf Theiss Romania

SS&C Intralinks: Can you tell us about yourself, your position and company?

Ileana Glodeanu: I am a partner at Wolf Theiss, head of the corporate/M&A practice in the Bucharest office. I have a particular focus on Energy, TMT and Pharma, and I have advised on some of the largest transactions concluded in the past few years in Romania. I am also a member of the firm’s private equity initiative. I have worked with many of the major private equity managers and investment funds across CEE/SEE.

Wolf Theiss is one of the leading law firms in Central, Eastern and Southeastern Europe, specializing in providing assistance in international business. With more than 400 lawyers in 13 countries, over 80 percent of the firm's work involves cross-border representation of international clients. Opened in 2005, the Bucharest office is one of the most representative branches in the network, and I joined this office at the beginning of 2005.

I like challenges, I would like to grow every day, [and] everything that is dynamic and generates new tests is a source of satisfaction. I watch with interest, enjoy new industries and like to follow dynamic sectors such as the IT industry, Energy, Pharma and others. To be a good lawyer and understand the businesses and different industries, you have to know the realities and risks of each of those areas.

How extensively have you worked with AI in your deals? How has AI affected that work?

Ileana Glodeanu: We are expecting that AI will significantly transform the M&A landscape and that in the not-too-distant future, we will be using all sorts of AI-powered tools for automating a wide range of tasks, from data collection and preparation of virtual data rooms (VDRs) to analysis, risk identification and quantification.

Until now, we have used AI-powered tools, including the AI Redaction tool provided by Intralinks, particularly for preparing virtual data rooms and drafting large quantities of documents. There are cases where this tool can be very helpful, especially when dealing with a large quantity of personal data that needs to be redacted, and this has shortened drastically the time spent on certain tasks of this sort.

In relation to the activities related to analysis, risk identification and quantification, things are a bit more incipient. We are currently still identifying and testing certain solutions, and we expect that things will not change radically in the very near future. We are seeing more and more tools available for contract automation that could help in drafting certain transactional documents and could shorten the time spent on certain drafting tasks.

How do you see AI impacting the M&A landscape and deal flow in CEE in 2024–25?

Ileana Glodeanu: AI technology [has] had a very surprising evolution, and it is rather difficult to predict what types of tools will gain traction in the near future. However, we expect to see better tools on the market that will help with the analysis of large quantities of documents and with identification.

This will most likely result in three trends, namely:

Accelerated due diligence: We believe that AI is likely to continue playing a significant role in expediting due diligence processes. AI can quickly analyze large datasets, helping M&A professionals identify potential risks and opportunities more efficiently. This could not only accelerate the due diligence timeline but also ensure a more comprehensive assessment of the target.

Enhanced decision-making: AI would provide predictive analytics and insights based on historical data, assisting dealmakers in making more informed decisions. This could include market trend analysis, valuation predictions and risk assessments tailored to the CEE region.

Increased deal sourcing: AI-powered platforms could contribute to the identification and sourcing of potential M&A targets. Automated screening processes could analyze vast amounts of data to pinpoint companies with strategic fit, potentially expanding deal flow. The use of AI in deal sourcing has the potential to broaden the scope of opportunities. By efficiently analyzing and categorizing companies based on predefined criteria, M&A professionals can discover targets that might have been overlooked using traditional methods.

In what specific areas of the due diligence process do you see bigger potential for AI to support your work, and how?

Ileana Glodeanu: As mentioned above, there are several areas where AI can significantly support the work, namely:

Document review and analysis: AI-powered tools could help in document review by swiftly analyzing large volumes of documents, extracting key clauses, identifying potential risks and providing a comprehensive overview. This would expedite the entire due diligence process.

Contract automation: There seems to be a growing availability of tools for contract automation. These tools have the potential to aid in drafting specific transactional documents, potentially reducing the time spent on certain drafting tasks.

Regulatory compliance checking: AI could assist in the future navigation of complex regulatory landscapes. Automated compliance checking tools should be able to swiftly analyze regulatory changes and compare them against the target company's operations, ensuring that all legal requirements are identified and addressed during due diligence. For the Romanian market, such tools are not available for the time being. However, we hope to see them in the near future.

Jorge Abugaber, Carlsquare Poland

SS&C Intralinks: Can you tell us about yourself, your position and company?

Jorge Abugaber: I am a Managing Partner at Carlsquare and head of our Warsaw office from where we cover Poland and the CEE region. I have lived in Poland for over 12 years and have over 16 years of experience in the M&A industry in both the U.S. and CEE. Prior to joining Carlsquare in 2023, I was at Santander CIB where I was an MD covering the TMT sector. Before that, I had roles at Trigon in Warsaw and J.P. Morgan in New York City.

Carlsquare is a leading technology investment bank focused on mid-market M&A. We have 170 employees globally across 11 offices in eight countries in Europe and North America. We close over 50 deals per year and are the most active M&A advisor in Germany. We focus on innovative, high-growth companies in key sectors such as Software & Tech, Consumer/Internet, Business Services and Industrial Tech.

How extensively have you worked with AI in your deals? How has AI affected that work?

Jorge Abugaber: We are in the process of testing a variety of AI tools and platforms to roll out across Carlsquare to stay at the cutting edge. Where we have used AI to date, it is generally integrated into our existing software platforms as an additional functionality, i.e., we already have a license and the platform has added AI for users. Long-term, we are interested in AI integrated into existing software platforms and organizational AI where we leverage our collective knowledge and data resources to derive significant efficiency gains.

How do you see AI impacting the M&A landscape and deal flow in CEE in 2024–25?  

Jorge Abugaber: AI has significantly impacted the conversation around growth opportunities for all software businesses and even non-software businesses. As a result of this enthusiasm, capital has been redirected toward companies with existing AI features or AI in their roadmap. We expect this trend to continue and evolve quickly, and it is likely that demand from investors will continue as AI solutions mature.

In what specific areas of the due diligence process do you see bigger potential for AI to support your work, and how?

Jorge Abugaber: The most manual processes during due diligence are the first areas in which we see opportunities for AI deployment. Examples of the most manual processes include question monitoring and tracking, diligence tracking, uploading documents and document redaction, among others.

Tomasz Danis, AVIVO Capital

SS&C Intralinks: Can you tell us about yourself, your position and company?

Tomasz Danis: I am the founder and managing partner of AVIVO Capital, a venture capital fund from Poland, investing in Rounds A/B in CEE. At AVIVO, we are targeting the equity gap between European Union-fueled pre-seed and seed rounds and typical growth equity, which comes much later.

I have more than 12 years [of experience] in the venture capital industry managing seed and growth-equity VC funds. With the experience of 40 invested and managed portfolio companies and more than 20 already exited, I delivered over EUR 250 million in exit proceeds to investors.

Prior to AVIVO Capital, I worked as a partner at MCI Capital and managing director of Rocket Internet CEE. Before that I spent almost a decade at McKinsey & Company, focusing on [the] TMT and energy sectors.

How extensively have you worked with AI in your deals? How has AI affected that work?

Tomasz Danis: We have introduced AI already in three aspects of our dealmaking at AVIVO.

First, we filter every opportunity as either AI-proof (at least in the mid-term) such as advanced materials, advanced manufacturing, robotics, etc., or AI-ready, i.e., [the] presented to AVIVO solution should be already equipped with an AI engine or be in the process of transition from manual to AI operations. Companies must pass these filters, or we do not invest.

The second aspect of AI already in use at AVIVO are LLM models used for validation of the investment thesis of investment candidates (e.g., initial assessment of the competitors, discovery of similar solutions, etc.).

Finally, we use AI-supported software to evaluate investment opportunities, which combines their performance (revenue growth, employment, amount of capital raised, etc.) in one index. Such solutions are available on VC-supporting SaaS platforms, but currently, we use them only as extra guidance on target companies’ discovery as the quality of index indication is not yet consistent.

How do you see AI impacting the M&A landscape and deal flow in CEE in 2024–25?

Tomasz Danis: I expect in [the] coming years AI will become a major theme for investments with almost every company tapping into the opportunity of presenting themselves as AI-ready or at least “in transition.” That creates opportunities for new, disruptive companies to conquer incumbent sectors with faster moves and AI leadership positions in the segment.

With that, I expect a lot of price inflation in the AI segment before the investors learn which AI application can be efficiently monetized (similar to the internet or blockchain bubble).

That said, I expect a lot of volatility in the M&A market surrounding AI a few years down the road — beyond 2025, probably.

In what specific areas of the due diligence process do you see bigger potential for AI to support your work, and how?

Tomasz Danis: As I mentioned before, I expect AI tools (available already) to directly support AVIVO’s commercial DD [due diligence] part, technical solution viability assessment, competitor analysis, business plan feasibility, legal/regulatory framework, etc.

More so, I expect multiple AI tools to be implemented in [the] coming months by financial due diligence providers, allowing for more accurate assessment of financials and risk identification.

Finally, a majority of the legal paperwork should be AI-supported, as many of such businesses already emerged using LLMs to prepare draft documents.