The Emerging Role of Artificial Intelligence in A&D M&A
Artificial intelligence deals are rapidly accelerating, with GlobalData reporting an average deal value of $159 million. The number will almost certainly increase as technology advances and companies perceive more opportunities. While most growth has occurred in the Asian Pacific, deals in the South and Central American markets are accelerating. A&D companies continue to advance AI Capabilities both organically and via acquisitions. While AI used to be the domain of big tech, defense companies are increasingly using this technology to increase in-house capabilities.
In the immediate future, we anticipate a growing role for AI both on and off the battlefield. Its potential offerings include unmanned teams, drone swarms, autonomous weapons, and increased surveillance, logistics, and cybersecurity capabilities.
Modern militaries are increasingly building massive databases. This data deluge poses a significant problem in terms of how to manage and mine such information. AI intelligence can reduce the pressure by analyzing the data and offering actionable insights. It can provide militaries with more information than they ever had before, without exhausting limited resources or requiring significant additional new hires.
Moreover, the race for AI dominance between the U.S. and China has already begun in earnest. The country with the strongest AI capabilities stands to gain a significant advantage—both in reality and in perception. We anticipate significant government investment in AI technology, boosting contract opportunities and incentivizing A&D companies to innovate. Companies that want to stay ahead of the curve must not only understand the benefits of AI, but also be very realistic about the challenges it poses. Developing strategies to adapt to these challenges before they become a crisis may determine dominance in this space.
AI poses myriad ethical quandaries, particularly when it comes to the use of autonomous weapons. The complexity of developing new AI solutions that comply with real or anticipated regulations also serves as a deterrent. But A&D companies must cooperate with governments to innovate. China and Russia plan to dominate the U.S., and companies must not shrink away from big innovations that potentially offer big wins. AI is a powerful tool to companies who want to come out on top. Powerful tools present big risks. But companies who wield that risk wisely, who innovate intelligently and deliver on their promises, stand to make massive gains as the market begins looking toward this growing trend. The time to put your AI plan into place is now. Doing so will ensure more contracts, better contracts, and a better range of M&A opportunities down the road.