Every M&A deal comes with its headline numbers. Valuation, synergies, growth potential. But behind the investor deck and closing dinner lies a less glamorous reality: hundreds or thousands of contracts that must be reviewed before the deal is safe to sign. For many acquirers, this stage is treated as a box to tick.
In reality, manual contract review is a silent drag on speed and value capture. It slows down closings, inflates fees, and leaves room for liabilities to slip through undetected. For too long, leaders have accepted this as the unavoidable “cost of doing business.” But that cost is far from benign. It’s a silent tax on M&A value, collected through inflated legal bills, delayed timelines, missed liabilities, and painful post-merger integrations.
Today’s M&A leaders don’t have the luxury of slow, manual diligence. Generative AI isn’t just making contract review faster; it’s rewriting the economics of the process. It attacks each layer of this “silent tax” head-on: collapsing review timelines, exposing buried liabilities, and converting static legal text into actionable intelligence. In this article, we’ll put real numbers to this hidden cost and show how an AI-driven approach transforms contract review from a deal bottleneck into a strategic advantage.
In reality, this silent tax isn’t a single expense. It’s a compound drag made up of several interlocking costs. Some are obvious, like inflated legal fees. Others are harder to spot until they’ve already eaten into deal value. Together, they slow momentum, cloud risk visibility, and undermine integration success. Breaking it apart into its components makes clear just how costly manual review really is.
Legal fees for M&A due diligence often appear as a lump sum, obscuring the granular cost of manual contract review. It’s not just if you hire lawyers, but how their time is spent. A mid‑sized acquisition often involves hundreds of contracts. Even with a conservative estimate – say, reviewing 500 contracts at 15 minutes each – that’s over 125 hours of skilled review. Add consultants and compliance advisors who need to sift through the same PDFs and email chains, and the meter keeps running.
Human review is inherently linear and prone to fatigue. This isn't a critique of legal professionals; it's a limitation of the process. When the stakes are this high, relying solely on a manual page-by-page slog is both inefficient and risky.
Deals thrive on momentum. Manual review slows it to a crawl. The issue isn't just the hourly costs racking up; it's the strategic cost of delay. Manual reviews directly extend the due diligence phase, pushing out closing dates. A 2024 study even revealed a trend: for large deals, approximately 40% took longer to close than initially projected.
Even with short delays, market conditions can shift, competitive bids can emerge, or internal deal champions can lose momentum. This “deal fatigue” is real and costly. Drawn-out processes often force a lower purchase price or less favorable terms just to get the deal over the line, eroding value before the ink is even dry.
The most dangerous tax is the one paid on a missed liability. The reality of manual review is that high-impact clauses are often missed: change of control triggers, uncapped indemnities, aggressive termination rights, or hidden IP encumbrances that can fundamentally undermine the financial rationale of an acquisition.
These aren't minor oversights. A single missed customer consent requirement can jeopardize a key revenue stream. An overlooked non-compete can derail post-merger operations. With so much at stake, it’s telling that a 2024 Deloitte survey revealed a significant number of firms have walked away from deals due to red flags that were likely buried in contracts.
There is a pain of manual review that doesn’t end when the deal closes. It creates a “dark data” legacy that haunts the integration process. With manual diligence producing unstructured, siloed summaries, it’s nearly impossible to extract aggregated, actionable insights. Questions like "How many of our new contracts have this specific clause?" should be simple, but instead are a massive, costly undertaking. This lack of precise data directly increases future compliance and operational costs for the combined entity, powering it through is no longer a viable strategy. Not when a missed clause or delayed synergy can cost millions. The longer you delay intelligent automation, the more value you let leak away.
So what should legal and M&A leaders do? The first step is to rethink contract diligence itself: Not as a box-ticking exercise to avoid risk, but as a high-value, intelligence-gathering mission. This shift reframes the process from defensive (“what problems are we buying?”) to strategic (“what operational realities and opportunities are we inheriting?”).
From there, the question becomes how to execute that mission without drowning in the mechanics of review. This is where the Augmented Intelligence Mindset comes in. The aim isn’t to replace human judgment, but to amplify it. By offloading exhaustive, repetitive tasks to technology, legal and M&A teams can focus on the high-impact work: complex negotiations, nuanced risk mitigation, shaping integration strategy, and guiding the business forward. In this model, technology isn’t a bolt-on efficiency tool; it’s a critical investment in deal speed, precision, and post-close value capture.
The new playbook for diligence starts with GenAI at its core – tackling the friction points that slow deals, obscure risks, and erode value across legal, operational, and cultural fronts.
GenAI shifts contract review from a reactive task to a proactive lever. It doesn’t just read faster. It understands structure, detects anomalies, surfaces the patterns that matter before risk snowballs or value evaporates.
Traditional contract review works at human speed. GenAI doesn’t. It ingests thousands of documents in hours, not weeks. But more importantly, it goes beyond keyword search. It parses clause intent, flags deviations, and identifies both red flags and white space. The result: diligence that scales without sacrificing nuance.
We’ve seen this firsthand. A global publisher used Execo’s GenAI-powered contract digitization to review thousands of inherited agreements. What once would’ve taken months was resolved in days: risk exposure reduced, integration unlocked, and control restored.
Manual review wears down over time. GenAI doesn’t blink.
Whether it’s change of control provisions or indemnity caps, GenAI applies logic and risk profiles with unwavering consistency. It doesn’t miss the third variant of an obscure clause just because it’s 2 a.m. or the tenth hour of review. That consistency shrinks the risk premium baked into most legal estimates and brings clarity where fatigue once ruled.
Simply dropping contracts into an LLM won’t deliver clarity. The real breakthrough comes from intelligent digitization – using GenAI to extract and structure contract data. Obligations, renewals, exclusivities, once buried in dense legal text, are transformed into live data points that decision-makers can act on.
For integration teams, this is the difference between flying blind and seeing the full landscape. Vendor overlaps, conflicting terms, hidden dependencies don’t just emerge but become more manageable.
More than the technical impact is the culture. GenAI clears the noise so legal teams can do what they’re best at: strategy, not sorting. By automating the triage, tagging, extraction, comparison, GenAI frees lawyers to focus on negotiation and personal, expert judgment.
With GenAI, you are not removing people from the loop, but putting them in the right part of it. Let GenAI do the exhaustive groundwork (extract, tag, compare, etc.). Then, let your legal and strategy teams analyze the critical insights that require human discretion and business acumen. Think of it as the optimal division of labor. AI handles the haystack, your people focus on the needles.
The “Silent Tax” of manual contract review on M&A is real, measurable, and—left unchecked—deal-eroding. We’ve shown how it creeps into every stage: inflating legal costs, slowing momentum, obscuring liabilities, and hobbling integration. And we’ve shown how GenAI, when embedded into a deliberate human-AI workflow, doesn’t just reduce that tax, it converts diligence into a strategic lever.
In high-stakes M&A, the firms that will dominate the next wave of deals won’t be those that grind through diligence faster than their peers. They’ll be the ones who redefine diligence itself, treating it as an intelligence engine that accelerates closing, sharpens negotiation leverage, and lights the path for rapid post-close transformation.
The takeaway is simple: in a market where opportunities are scarce, valuations are tight, and integration risk is unforgiving, the winners will be the operators who stop paying the Silent Tax.
Execo’s Intelligent Digitization for M&A is the new operational mindset. By embedding AI into the fabric of your M&A playbook, we don’t just remove the drag from contracts, we turn every review into a source of speed, clarity, and competitive advantage.
The question isn’t whether GenAI can rewrite the playbook. It already has. The real question is: will you run the next deal with the old rules, or the new ones? Reach out to our team to discover how Execo can help you master the new rules of M&A.