Search
Contact
22.06.2020 | KPMG Law Insights

Artificial intelligence on the rise

Artificial intelligence on the rise

Artificial intelligence will permanently change the legal profession. The more tedious and error-prone routine tasks are performed by machines, the more time humans have to concentrate on complex, challenging issues. The first steps on this path have already been taken.

No company acquisition without due diligence. In painstaking detail, a team of lawyers sifts through the takeover candidate’s contracts to ensure that the buyer does not take any unnecessary risk.

For example, if the contracts contain so-called change-of-control clauses, the contractual partner may typically terminate the contract in the event of a change of ownership. If important customer relationships are lost for this reason, the purchased company is worth significantly less virtually overnight and the purchase price is unreasonably high.

Conscientious computer

What used to take whole teams of lawyers a lot of time, a computer now does in a short time. The computer is not only faster than a human; it is also more conscientious, because a human tires when reviewing large volumes of documents and risks making mistakes. However, the prerequisite is that the computer knows what to look for. This is where artificial intelligence comes into play. The keyword is “self-learning algorithm”.

The change-of-control clause mentioned above is a good example. The clause may have different names or keywords depending on the contract, such as Transfer of Ownership, New Management, or Transfer of Control. Many other formulations are conceivable. In order to work properly, the computer program must also be able to identify formulations that no one thought of when it was programmed.

Self-learning programs achieve this by analyzing texts on several levels. At the first level, the program simply searches for keywords. This search typically yields a large amount of hits. At the second stage, the program searches for recurring structures. This so-called syntactic analysis examines the order in which terms follow one another, whether they are close together or farther apart, and what terms or grammatical structures mediate between them. Many hits of the first level are sorted out here again. At the third stage, semantic analysis, the meaning of the terms used is included. Words with multiple possible meanings are clearly defined.

Following this pattern, the program can also analyze terms that the programmer did not specify. For example, if a clause is called “hostile takeover”, but comparable terms with comparable structures and semantic meanings occur in it as in other change-of-control clauses that the program has already analyzed, it will also flag the “hostile takeover” clause. In the final step, a human can then verify whether the clause is relevant or not.

The amount of data is crucial for success

In addition to the self-learning program, another element is necessary for the system to work successfully: A sufficiently large amount of data on which the program can develop its analysis capabilities. For example, all of a company’s contracts or its entire bookkeeping, or even all of a public authority’s notices.

Beyond the initial example of due diligence, the system offers advantages wherever it is necessary to filter out details from large amounts of data. This could be accounting irregularities, possible compliance violations, or the details of a typical settlement in related litigation. The only prerequisite is that all processes are recorded electronically and thus available for analysis.

Building up the necessary data volumes is a challenge in some cases. Pool solutions will become established here, which aggregate data from different companies or authorities, for example, and thus provide the software with the necessary basic material. The individual participant benefits both through the use of the gradually self-improving software and through the analysis of his data stock.

Explore #more

04.02.2025 | Deal Notifications

KPMG Law advises ROTOP shareholders in connection with an investment by GENUI and SHS Capital

KPMG Law Rechtsanwaltsgesellschaft mbH (KPMG Law) provided legal advice to the shareholders of ROTOP Pharmaka GmbH (ROTOP), a provider of development and manufacturing capacities for…

31.01.2025 | Deal Notifications

KPMG Law supports HWP with majority stake in instakorr GmbH

KPMG Law Rechtsanwaltsgesellschaft mbH (KPMG Law) advised HWP Handwerkspartner Group (HWP) on the acquisition of a majority stake in instakorr GmbH (instakorr). KPMG Law carried…

29.01.2025 | KPMG Law Insights

Green hydrogen from wastewater – legal hurdles in production

Hydrogen provides significantly more energy than gasoline or diesel. If it is produced using renewable energies, hydrogen can make a significant contribution to climate protection.…

29.01.2025 | Deal Notifications

KPMG Law advises HWP on the acquisition of Hydro-Tech GmbH

KPMG Law Rechtsanwaltsgesellschaft mbH (KPMG Law) advised HWP Handwerkspartner Group (HWP) on the acquisition of Hydro-Tech GmbH Hochdruck- und Reinigungstechniken Maler und Betoninstandsetzungsarbeiten (Hydro-Tech). KPMG…

29.01.2025 | KPMG Law Insights

What the Green Claims Directive means for companies – an overview

With the Green Claims Directive, the EU will introduce extensive regulations on the requirements for permissible environmental claims. The aim is to prevent greenwashing so…

27.01.2025 | In the media

Merger control and national security: key considerations for corporate transactions

Financier Worldwide discusses key merger control and national security considerations for corporate transactions with Lisa Navarro, Stuart Bedford, Gerrit Rixen (KPMG Law Germany), Helen Roxburgh…

24.01.2025 | In the media

Guest article in the ESGZ: Opportunities with discrimination risks: AI in the field of human resources

Artificial intelligence (AI) is no longer a dream of the future, but is already changing the world of work at a rapid pace. Companies are…

24.01.2025 | Deal Notifications

KPMG Law advises DKB on joint ventures with Sparkassen-Finanzgruppe in credit processing

KPMG Law advises Deutsche Kreditbank AG (DKB) on the establishment of a joint venture in the field of credit card processing with companies of the…

24.01.2025 | KPMG Law Insights

Tübingen packaging tax statute is constitutional

Tübingen’s packaging tax is constitutional. The Federal Constitutional Court has rejected a constitutional complaint against the packaging tax statutes of the University City of Tübingen.…

22.01.2025 | KPMG Law Insights

The EU packaging regulation sets strict requirements for packaging

The EU has adopted the Packaging Regulation. After the European Parliament adopted the Commission’s draft on April 24, 2024, the EU member states also approved…

Contact

Dr. Konstantin von Busekist

Managing Partner
Head of Global Compliance Practice
KPMG Law EMA Leader

Tersteegenstraße 19-23
40474 Düsseldorf

Tel.: +49 211 4155597123
kvonbusekist@kpmg-law.com

Philipp Glock, LL.M.

Partner
Solution Line Head Legal Corporate Services

Heidestraße 58
10557 Berlin

Tel.: +49 341 22572529
pglock@kpmg-law.com

© 2024 KPMG Law Rechtsanwaltsgesellschaft mbH, associated with KPMG AG Wirtschaftsprüfungsgesellschaft, a public limited company under German law and a member of the global KPMG organisation of independent member firms affiliated with KPMG International Limited, a Private English Company Limited by Guarantee. All rights reserved. For more details on the structure of KPMG’s global organisation, please visit https://home.kpmg/governance.

 KPMG International does not provide services to clients. No member firm is authorised to bind or contract KPMG International or any other member firm to any third party, just as KPMG International is not authorised to bind or contract any other member firm.

Scroll