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Powering Enterprises’ M&A Strategy with AI-Powered Smart Contract Analysis

April 5, 2022 - Team EdgeVerve

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Mergers and acquisitions (M&A) are emerging as a strategic tool for expanding business operations. And one of the core components of M&As is due diligence. In the event of contract analysis, the due diligence process plays a significant role in ensuring both parties’ safety against any unmentioned terms and conditions.

Evaluating the Importance of Contract Analysis

Due diligence is an integral part of contract analysis that involves investigating, auditing, and reviewing facts and details of a matter under consideration. And in the case of Mergers and Acquisitions, due diligence is performed on contracts/agreements signed between two or more parties. It involves examining the proposed parties’ financial and other track records before they enter into an agreement.

There’s just a significant difference between due diligence and contract analysis. The former is carried out at the beginning of signing a contract. The latter is an ongoing practice carried out throughout the contract lifecycle, ensuring all terms and conditions are met on time.

Contract risk analysis is crucial to every business agreement and is carried out by corporate lawyers. They measure the risks/ opportunities in these large volumes of customer and supplier contracts in a short period, sometimes in a few weeks. Efficient processing of these contracts depends on accurately understanding the terms and clauses.

The process is quite challenging, even for experienced lawyers, primarily when historical customer contracts are assessed manually to generate a representative assessment of potential risks/opportunities.

Challenges Involved with Manual Contract Analysis

Contracts existing in multiple silos: Historical customer contracts, reside in multiple silos. Therefore, bulk contract papers’ manual analysis requires massive human effort to assess the exposure to risks.

Involves huge paperwork: In the absence of legal contract analysis software, scanning each paper document for assessing their risk exposures is a humongous task. Moreover, historical paper documents are rarely structured; hence, analyzing each term and condition and assessing potential risks or opportunities hidden is a daunting task.

Contractual data is skewed or unreadable: Most of the data in these legacy contracts are skewed or deemed unreadable when using traditional extraction technology like OCR. As a result, such contract analysis tools don’t deliver the desired accuracy of the information, and they often struggle to process low-quality documents with issues.

AI-powered Contract Analysis: The Best Bet for Addressing Contract Analysis Challenges

Businesses need a contract analysis solution powered by AI and NLP. Advanced techniques like Natural Language Processing (NLP), Machine Learning, and Computer Vision capabilities offer the following benefits:

Introducing XtractEdge: The Future of Contract Analysis

XtractEdge is a comprehensive suite of Document AI and Contract Analysis powered by AI to extract actionable insights from various enterprise documents, contracts, and legal agreements.

This intelligent contract analysis tool uses human-in-the-loop to help businesses unlock opportunities and identify risks hidden in the terms and conditions of historical contracts. For instance, XtractEdge’s AI-powered contract analysis solution helped power a Hitech manufacturer’s M&A strategy. With its automated contract analysis capabilities, XtractEdge successfully processed the historical load of 30K+ customer contracts in just 1 week, extracting 50 intents and 125 entities from 4 different types of contracts with medium to high complexity.

Moreover, the contractual data extracted when fed into the Business Intelligence system can quickly generate accurate reports in real-time. Further, this best contract management software follows a robust security system to prevent unauthorized access to sensitive information. It also calculates risk based on differences in critical language and legal terms and performs risk-scoring on the entire portfolio of contracts.

Conclusion

Mapping a colossal volume of historical documents manually is not an intelligent way to contract analysis. Also, having too many human touchpoints can delay the process, resulting in lost business opportunities.

Contracts are written documents validating the relationship between two or more partners when entering into a Merger or Acquisition. But manually assessing the terms, conditions, hidden risks, and opportunities can result in many granular details being ignored.

Hence, an AI-powered smart contract analysis software like XtractEdge can relieve the legal teams of headaches and enable seamless contract abstraction, review, and risk scoring.

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