The Deal Landscape is Shifting

Mergers and acquisitions (M&A) in the life sciences sector are heating up again, according to recent research from West Monroe. After a period of uncertainty, companies are once again looking to combine forces. But this isn’t just about getting bigger; it’s about getting smarter, especially when it comes to artificial intelligence (AI).

AI’s Pervasive Role

The study highlights that AI is now a factor in a staggering 93% of life sciences deals. This isn’t surprising. AI offers the potential to accelerate drug discovery, personalize treatments, improve diagnostics, and streamline operations. Companies see M&A as a way to quickly acquire AI capabilities and talent they might not have in-house. The rush to integrate AI is creating a new dynamic in the marketplace.

Beyond the Hype: Getting AI-Ready

However, simply acquiring an AI-powered company isn’t enough. The real challenge lies in integrating that technology and making it work effectively. West Monroe’s research emphasizes the importance of AI “readiness.” This encompasses everything from having robust data governance policies to ensuring that the workforce is trained to use AI tools effectively. Many organizations overlook these crucial steps, setting themselves up for failure.

Data: The Fuel for AI Success

Data governance is paramount. AI algorithms are only as good as the data they’re trained on. If the data is incomplete, inaccurate, or poorly organized, the AI will produce flawed results. Companies need to establish clear data standards, ensure data quality, and create systems for managing and sharing data across the organization. This is often a complex and time-consuming process, but it’s essential for realizing the full potential of AI.

People Power: Workforce Adoption is Key

Workforce adoption is another critical factor. Even the most sophisticated AI tools won’t deliver value if employees don’t know how to use them. Companies need to invest in training programs to equip their workforce with the skills they need to work alongside AI. This may involve teaching employees how to interpret AI-generated insights, how to use AI-powered tools, or how to collaborate with AI systems. Resistance to change can be a major hurdle, so it’s important to communicate the benefits of AI and address any concerns that employees may have.

Execution is Everything

The research suggests that the companies that will succeed in this new M&A landscape are those that prioritize execution. It’s not enough to simply acquire AI technology; you need to integrate it effectively, manage your data properly, and train your workforce. Companies that fail to do these things will likely struggle to realize the promised benefits of AI.

A Word of Caution

There’s also the very real risk of overpaying for AI capabilities. The hype surrounding AI can drive up valuations, leading companies to make acquisitions that are difficult to justify financially. Due diligence is more important than ever. Acquirers need to carefully assess the target company’s technology, data, and talent to ensure that they’re getting a good value.

Looking Ahead: A Competitive Advantage

In conclusion, the life sciences M&A market is experiencing a resurgence, driven by the growing importance of AI. However, success in this market will depend not just on acquiring AI capabilities, but on executing effectively. Companies that prioritize data governance, workforce adoption, and careful due diligence will be best positioned to thrive. In the near future, AI will not only give a competitive advantage to companies, but it will be required to compete in the marketplace.