As AI credentials become increasingly pivotal in M&A decision-making, dealmakers are rethinking what makes a business defensible, amid concerns over valuation volatility and the need for new diligence frameworks.
Artificial intelligence is reshaping merger and acquisition strategy as dealmakers increasingly look for businesses that can withstand disruption from the technology rather than simply adopt it. Consultancy.uk reported that more than two-fifths of firms are now prioritising AI-enabled targets, reflecting a growing belief that AI credentials can strengthen a company’s market position and future earnings power. In KPMG’s view, the issue is no longer whether a target uses AI, but whether AI will erode or reinforce its long-term competitive edge.
That shift is forcing buyers to rethink a core M&A question: what makes a business defensible? KPMG’s Global M&A Pulse Survey found that 55% of respondents pointed to regulatory factors, including compliance and security barriers, while 52% highlighted workflow integration as key markers of durability. Other attributes, such as domain expertise, proprietary data, AI architecture, switching costs and network effects, also mattered, but none commanded broad agreement across dealmakers.
The problem, according to KPMG, is that many existing diligence and valuation models were built before AI became a material factor in enterprise value. The consultancy said there is no settled framework for folding AI defensibility into investment theses, due diligence or pricing assumptions. That gap matters because 36% of respondents said these considerations were affecting valuation more than target selection, a sign that expectations around AI may be making deal pricing more volatile.
KPMG’s broader 2026 M&A Outlook suggests that AI is now embedded across the deal process, from exhaustive contract review to competitive benchmarking, rather than being treated as a pilot project. The report also says private equity firms remain active, with 37% expecting to complete more than five deals in 2026, while 71% are open to or actively pursuing portfolio separation. The wider backdrop is one of rebuilding deal pipelines, stabilising financing and rising technological disruption, all of which is pushing buyers to place a premium on assets they believe can endure.
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