Authored By: Yash Karkera
Southampton Solent University
Introduction
There has been a rapid growth of AI in the legal industry in the recent times, particularly the area of Mergers & Acquisitions transactions has seen a drastic paradigm shift. Traditional M&A transactions in the past have had a significant amount of human control overseeing majority of tasks such as due diligence, regulatory checks, reviewing financial records, drafting documents, etc. However, the growth of AI in the legal industry has caused a lot of global corporate law firms to adopt AI powered tools to increase efficiency and reduce the time invested in time consuming tasks such as risk assessment, transactional analysis, due diligence, etc .
Despite the said advantages of AI in Global M&A transactions, it has risks and has raised significant regulatory and legal concerns in recent times. Matters such as cybersecurity, client confidentiality, data protection and inaccurate AI results have been becoming more and more important in legal practice, particularly because of lack of no clear global regulations on AI governing high stakes transactions. As a result, corporate lawyers and firms face significant ambiguity regarding the use of AI powered technologies in global transactions.
The article reflects upon the use role of AI in modern global M&A transactions especially considering AI’s impact on due diligence and key decision making. The article articulates that whilst AI has its advantages in increasing efficiency, it must be under continued human supervision to ensure legal integrity to safeguard an organisation’s stakeholders and to solidify corporate transactional integrity for global law firms which is also furthermore mandated by article 14 of the EU AI Act for high-risk AI powered tools.
AI in Corporate M&A
Modern M&A transactions on a global level considering multiple jurisdictions often involve substantial amounts of contracts, financial records, corporate data, compliance documents, etc. The massive number of documents make the transactional process really time consuming for law firms. Furthermore, since most of the law firms rely on “billable hours” as to calculate their payment for the time invested in the transaction, this makes it really expensive for the parties seeking corporate legal service.
Therefore, law firms, corporations, investment firms, etc are increasingly using AI tools to increase the efficiency for both the lawyers and the parties involved in the transaction. One of the most crucial and beneficial uses of AI in global M&A is in the due diligence stage of the transaction as AI powered tools can examine and analyse thousands of documents and can quickly highlight grammatical errors, unusual contractual clauses, potential legal risks and can assist lawyers to review complex documents and compliance requirements. This in turn enables law firms to swiftly complete M&A transactions and can benefit clients seeking quick changes to adapt to market risks and changes.
AI can further assist lawyers in analysing contract, predictive analytics and identifying risks involved, further solidifying risk assessment for clients helping incorporations to make informed corporate decisions.
In conclusion, AI is used in M&A transactions due to its ability to save financial expenses, reduce billable hours and to make the transaction more effective for both the lawyers and companies/parties involved. By automating administrative and menial repetitive tasks, AI assists law firms to focus its time and energy towards tasks that require complex strategic thinking or tasks that require the ‘human element’ such as legal advisory .
Regardless of the benefits, due to the increased use of AI there have also been growing concerns regarding AI in the legal industry particularly regarding corporate accountability, commercial liability, data protection and client confidentiality. Furthermore, it can create complexities in determining intellectual property valuations and rights. The significant supreme court case of Thaler v Comptroller-General of Patents, Designs and Trade Marks [2024] 2 All ER 527 showcased that AI powered tools cannot be owners of the IP and are not recognised as ‘inventors’ in accordance with Patents Act 1977 .
Legal Risks and Challenges
Client Confidentiality and Date Protection is one of the major concerns relating to the use of AI in global M&A transactions and corporate lawyers must ensure compliance with GDPR (General Data Protection Regulation) . Since AI is heavily relied upon by lawyers in the due diligence stage, the tool processes very large amounts of documents that contain highly sensitive information such as confidential agreements, employee contracts and data, trade secrets, financial records, company future projections, etc.
If through the use of AI, the said sensitive data is improperly stored or poses a risk of leak, corporate law firms would face significant repercussions such as severe legal consequences or bad publicity causing damage to the company’s reputation. The laid down risks becomes even more intricate for law firms in global cross-border transactions involving multiple jurisdictions as countries may have their own separate laws governing data protection and different regulatory standards.
Inaccurate AI generated information is another substantial issue in the use of AI. AI powered tools are notoriously known for hallucinating false information or inaccurate outputs. Regarding global M&A transactions, AI tools are also used for risk assessment and contract reviews and can be highly beneficial but can fail to identify hidden risk or liabilities in the documents. Furthermore, AI powered tools may fail to recognise important legal obligation from the documents and may have potential adverse effects on the clients in the future.
Such errors may have significant impact on the clients as they may result in contractual issues, financial losses, unnecessary delays in deal completion and may even break up the deal. These errors further cause a dilemma in the legal industry regarding culpability. The question arises who must be held legally responsible for the above-mentioned errors, whether it must AI tool developers, law corporations or the lawyers using AI. This ambiguity causes legal uncertainty for clients involved in M&A transactions and it possess a significant challenge for corporate lawyers and legal practitioners.
The Statutory framework of Supply of Goods and Services Act 1982 provides some assurance as it imposes an implied contractual duty on solicitors to have “reasonable care and skills” when providing legal services to their clients. Furthermore, the solicitor’s regulatory authority in the UK has cleared some ambiguity by allowing law firms to use AI powered tools but stated that the firms are solely responsible for the work carried out by AI systems. The SRA also imposes several duties on solicitors to act with competence and integrity through principle 2 and principle 5 . In accordance with the said principles, it would be a breach of SRA guidelines for corporate lawyers to use inaccurate unverified data generated through AI.
Therefore, the lawyers and law firms would be legally liable for using fake inaccurate information generated by AI tools. This can also be seen in the case of Rex (Ayinde) v Haringey London Borough Council . The said case is where the claimant’s counsel cited fake case laws made by AI for their case. The court decision criticised the lawyers for not verifying the fake cases and stated that the lawyers were professionally responsible for ensuring authority of case laws.
However, since different jurisdictions have different approaches and regulation regarding use of AI in M&A transactions global law firms face complex issues to ensure deal compliance in accordance with different jurisdictions and legal systems.
Therefore, regardless of the growing capabilities and use of AI in the legal field, it is really important to maintain human supervision on AI systems in M&A transactions. It is clearly evident that use of AI tools poses a significant risk and therefore law firms cannot solely rely on AI systems when advising global clients or working on transactions that involve multiple jurisdictions. Furthermore, since there are implied professional obligations and a fiduciary duty on lawyers towards their clients, sensitive complex tasks cannot be delegated to AI powered tools .
The Future of AI and Corporate Law
As businesses all over the world seek to prioritize time efficiency and data driven decision -making, the growth of AI in M&A transactions and corporate law is expected in the coming future.
However, regardless of the expected growth in the use of AI powered systems, the lack of uniform global legal regulations causes ambiguity for law firms. Therefore, clear global guidelines are required for legal certainty in the use of AI in corporate law . The guidelines must address several aspects such as client confidentiality, data protection, liability, corporate accountability, transparency, etc.
It is quite discernible that although AI powered systems can increase efficiency for corporate law firms and can automate time consuming tasks such as administration, due diligence, etc but cannot be a valid substitute for the human element that is necessary for complex tasks such as risk assessment, legal advisory, deal negotiations, ensuring legal compliance, etc. Therefore, although AI is a beneficial tool for lawyers in global transaction, the human aspect is mandatory.
The future of AI and M&A transactions will ultimately depend on the development of clear global regulations and the technological advancements in the AI industry. While AI industry is booming at the moment and has great potential to grow, corporate law firms must ensure legal accountability, continuous legal supervision and transparency in order to maintain legal integrity towards their clients.
Conclusion
The intersection between Corporate Law and AI showcases more than technological advancement but signifies a substantial shift in the mindset of global corporate law firms. As already established in the article corporate legal practices such as due diligence and administrative tasks during M&A transactions have significantly shifted for lawyers in attempts to improving efficiency by rerouting their focus towards more complex legal decisions.
However, benefits of AI powered tools are not without drawbacks, the efficiency benefits are inevitably linked to inaccuracy risks and data leaks. This can cause serious repercussions for corporate law firms from client losses, reputational damage, etc. Furthermore, the duties of a lawyer and professional obligations towards clients cannot be delegated to AI powered tools. In conclusion, the future of corporate law would definitely need corporate lawyers to have the ability to do more than reading and drafting contracts but also continuously supervise and integrate the work of AI powered tools into corporate legal practice. While AI plays as a beneficial tool, due to the risks involved the human element is mandatory.
Ultimately the human element and clear regulatory guideline governing corporate responsibility, liability and data protection are mandates to ensure legal certainty for corporate law firms working on global M&A transactions involving multiple jurisdictions.
Regardless of the significance of risks of AI, it is quite evident that the future of M&A and Corporate Law is inevitably Artificial intelligence.
Bibliography
Table of Case Laws
Rex (Ayinde) v Haringey London Borough Council [2025] 4 WLR 71
Thaler v Comptroller-General of Patents, Designs and Trade Marks [2024] 2 All ER 527
Table of Statutes
EU AI Act
GDPR (General Data Protection Regulation)
Patents Act 1977
Solicitors Regulation Authority, SRA Principles 2019
Supply and Goods Act 1982
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