This article has been written by Khyati Khemka pursuing the Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from LawSikho. This article has been edited by Tanmaya Sharma (Associate, Lawsikho) and  Zigishu Singh (Associate, Lawsikho). 

Introduction

In this article, we will discuss what artificial intelligence actually is and look at the latest mergers and acquisition trends in this field. Further, we will divulge the reasons for big corporations to merge with or acquire budding artificial intelligence startups. Subsequently, we will discuss a few of the most significant and game-changing M&A transactions in the artificial intelligence domain of the year 2021.

Fast-paced technological advancements motivate leading as well as upcoming corporations to identify future breakthroughs in any way that benefits them. Continuously improving their goods and services for customers has become a major component of a corporation’s subsistence and growth. Numerous barriers hinder this process and prevent organizations from benefitting to their maximum potential. For starters, limited human capacity has compelled management to shift the burden onto synthetic cyberspace. Artificial intelligence is at its all-time high and does not seem to be slowing down. If anything, we can only expect it to progress from artificial narrow intelligence (ANI) to artificial general intelligence (AGI) and artificial superintelligence (ASI). 

Reaping the competitive advantages of these artificial intelligence means to constitute the topmost priorities of enterprises globally. Therefore, apart from creating their own automation, they continuously lookout for others who might be useful to their business. If so, merging or acquiring such artificial intelligence technologies that would benefit them at such competitive prices that the other party can’t deny. In 2021 itself, many high valued artificial intelligence-based mergers and acquisitions have been carried out. The purpose behind these transactions is not always the acquisition of pre-developed technologies. At times the main motive behind such moves is to procure the human resources that are capable of producing better and fruitful technologies with more resources than they can avail at bigger corporations if given sufficient opportunities and backing. Integrating the technology and objectives of two distinct entities can end up benefiting both parties. 

Artificial intelligence 

In today’s dynamically changing technological environment, all corporations aim to yield a first mover advantage and procure the advancements that best suit their interests. Some such developments include expert systems, natural language processing and machine vision apart from face and speech recognition. These are some features that come under the umbrella of artificial intelligence, which is the simulation of human intelligence by machines, especially computer systems. The hype around AI has increased in recent times as it can most often perform tasks better than humans, especially when it comes to detail-oriented and repetitive tasks. It definitely increases the efficiency and effectiveness of businesses. Even though they lack the ability to accommodate from one task to another, they deliver consistent results. Monotonous tasks require consistency which artificial intelligence excels at. It attracts businesses to rely upon them and invest at an increasing rate. 

Benefits of mergers & acquisitions

• It promises economies of scale via increased access to capital and lower costs due to higher volume.
• It enables economies of scope to continuously improve and grow. 
• It synergizes the capabilities of both to perform extraordinarily by uniting their resources. 
•  It provides channels for diversification of risk as often multiple revenue streams are unlocked by mergers and acquisitions. 
• Another common objective for this is to increase individual market share. 

AI mergers and acquisitions

1. Microsoft’s acquisition of Nuance

On April 12, 2021, Microsoft announced that it will acquire Nuance Communications, Inc. In the wake of COVID-19, it is one of the many healthcare sectors related to M & As to manage the urgent burden fallen onto it. Nuance is a leading provider of conversational artificial intelligence and cloud-based ambient clinical intelligence in the healthcare sector. It is with keeping in mind Microsoft’s recently accelerated efforts to provide industry-specific cloud offerings to support customers and partners as they respond to disruption and new opportunities. Microsoft is supposed to acquire Nuance for $56.00 per share, about 23 percent above its closing deal. The transaction is valued at $19.7 billion, which includes Nuance’s net debt. Without any change in management of Nuance, the acquisition is expected to be closed towards the end of 2021.

2. DataRobot’s acquisition of Zepl

On May 11, 2021, a leading firm in AI, DataRobot through its virtual conference titled AI Experience Worldwide announced the acquisition of cloud-based data science and analytical platform, Zepl. The Boston-based acquirer believes that this transaction will unlock new capabilities within the company’s enterprise AI platform for the world’s most advanced data scientists. This acquisition and incorporation of Zepl, DataRobot aims to derive productivity, efficiency and collaboration avenues to suit multiple personas. It is a means to widen their clientele and tap into the previously unexplored possibility of additional flexibility for data scientists. 

3. Smart Eye acquires Affectiva

On May 25. 2021 Smart Eye and Affectiva announced their agreement according to which Smart Eye will acquire the latter for a consideration of USD $73.5 million. Both entities have been engaged in the automotive market. While SmartEye has over two decades of experience in building AI-based eye-tracking and delivering automotive-grade Driver Monitoring Systems, Affectiva has utilized its top-grade AI technology in-cabin sensing, using machine learning and computer vision to gain a deep, human-centric understanding of what is actually happening in a vehicle. Instead of competing with each other, both companies are joining forces to suit each other’s, complementary teams. This will help Smart Eye in increasing its market presence. Both combined have the capability to offer unparalleled, automotive-grade Interior Sensing AI and result in their establishment as market leaders. Apart from the automotive sector perks, Affectiva also brings to the table significant incremental revenues and profit from its industry-leading Media Analytics business.

4. Panasonic acquires Blue Yonder

On 17th September 2021, Panasonic declared that it had completed the acquisition of Blue Yonder which was announced in April earlier this year. This acquisition accelerates the organization’s shared vision of an autonomous supply chain. By unifying Panasonic’s sensing technologies and edge devices with Blue Yonder’s Artificial Intelligence /Machine Learning -powered planning, execution and commerce solutions, companies can create smarter and more connected e-commerce strategies, retail stores, warehouses, transportation, and workplaces. This unique end-to-end offering provides customers with unlimited visibility, control, and orchestration, allowing them to pivot operations in real-time, provide superior customer experiences, and deliver more profitable business outcomes. The employment remains unaffected through this transaction as the management will also be retained. The brand name of blue yonder will also be preserved, there will only be a shift in ownership. 

5. BigBear.ai merges with GigCapital4

BigBear.ai are new upcoming leaders in decision dominance that operationalize artificial intelligence and machine learning technologies through end-to-end data-driven analytic platforms. They provide information as well as decision-making support to their customers using artificial intelligence tools. These services are extended to both the private as well as public sectors, leading to a wide range of customer bases. GigCapital4 is a private-to-public entity also known as a Special Purpose Acquisition Company. Its sole motive is to help other private companies to be converted into publicly-traded companies. This transaction has led to the valuation of now BigBear.in Inc. to be placed at approximately $1.57 billion. 

6.  International Business Machines Corporation (IBM) acquires Turbonomic

In its quest to help its customers accelerate their journey to hybrid cloud and Artificial Intelligence, IBM in June 2021 closed its deal to acquire Turbonomic. This transaction complements IBM’s earlier acquisition of Instana and the launch of IBM Cloud Pak for Watson AIOps to address AI-driven automation of IT. This is an addition to IBM’s growing strategic investment in its ecosystem of business partners, such as Cisco, to help customers accelerate their journey to hybrid cloud and AI. IBM now provides its customers with comprehensive artificial intelligence-based IT operations services – application-centric performance and IT resources observability to run across a hybrid cloud environment. 

Conclusion

In the above article, we discussed what Artificial Intelligence is and how it is being used to suit various businesses to achieve higher efficiency and productivity. We also discussed some of the major mergers and acquisitions in the artificial intelligence sector this financial year. It can be clearly observed that the reasons for such transactions vary from acquihire to being listed as a public company. Businesses sometimes acquire their competitors as well whose technology could be a threat to their ability to turn profits in the future. Such action is anticipatory in nature but can give unparalleled market advantage to the company. With changing times and technology gaining bigger roles in our lives, corporations with their wide range of resources have the option to multiply exponentially. Identification and procurement of innovative modern methods is a continuous process and can be undertaken at any point in time and for any process of business. Even though many international businesses have been rapidly acquiring promising tech around the globe, it is never too late for those still considering doing the same to enter the arena. 

References

1. https://newsroom.ibm.com/2021-06-17-IBM-Closes-Acquisition-of-Turbonomic-to-Deliver-Comprehensive-AIOps-Capabilities-for-Hybrid-Cloud
2. https://www.businesswire.com/news/home/20210604005419/en/BigBear.ai-to-Become-Publicly-Traded-Company-via-Merger-With-GigCapital4
3. https://media.blueyonder.com/panasonic-completes-acquisition-of-blue-yonder/
4. https://www.businesswire.com/news/home/20210525005790/en/Smart-Eye-Acquires-Affectiva-to-Solidify-Stronghold-on-Interior-Sensing-Market
5. https://www.datarobot.com/news/press/datarobot-acquires-zepl-to-enhance-enterprise-ai-platform-capabilities-for-advanced-data-scientists/
6. https://news.microsoft.com/2021/04/12/microsoft-accelerates-industry-cloud-strategy-for-healthcare-with-the-acquisition-of-nuance/
7. https://healthitanalytics.com/news/microsoft-acquires-nuance-to-enhance-healthcare-ai-cloud-strategy
8. https://www.analyticsinsight.net/top-10-artificial-intelligence-mergers-and-acquisitions-in-2021/
9. https://www.analyticsinsight.net/top-artificial-intelligence-mergers-and-acquisitions-in-september-2021/
10. https://dealroom.net/.

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