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As artificial intelligence becomes increasingly embedded in everyday applications, it is also gaining meaningful traction in the legal M&A community, most notably through AI-powered virtual data rooms — or VDRs — and generative AI platforms purpose-built for the legal industry. These tools are reshaping how practitioners approach deal execution, due diligence review and contract management, automating processes that have long been manual and time intensive.
AI-powered virtual data rooms
Before the integration of AI, VDRs functioned primarily as standalone, secure repositories for uploading, downloading and viewing transaction-related documents. Today, many VDR providers are incorporating AI into their platforms, significantly expanding their core functionality. Modern AI-enhanced VDRs now offer improved search capabilities, conversational chat features, automated document summaries, redaction tools, diligence question tracking and response workflows, and automated document indexing and classification.
Underpinning these advancements are natural language processing and machine learning, which enable semantic searches that interpret the meaning and context behind words rather than merely matching exact keywords. The result is a marked improvement in both the speed and precision of document retrieval within a VDR. The same underlying technology powers conversational chat capabilities, enabling users to pose questions in plain language and receive context-aware responses — a significant step beyond traditional Boolean searches.
AI-powered VDRs may also feature automated redaction tools that enable users to identify and flag sensitive information — including financial data, personally identifiable information, protected intellectual property and privileged communications — and redact it automatically, eliminating the need for a legal professional to manually review each document. Certain AI-enabled VDR platforms also incorporate Q&A workflows, allowing diligence questions to be tracked and responded to directly within the platform. These workflows can hyperlink responsive documentation, reducing the time required to locate relevant materials and minimizing the often cumbersome back-and-forth between parties during the diligence process.
AI legal platforms
Beyond VDRs, law firms are increasingly adopting legal-specific generative AI platforms to enhance efficiency and productivity across their practices. Among the most widely adopted platforms are CoCounsel (Thomson Reuters), Lexis+ AI, Harvey AI, Spellbook and Darrow. These tools offer a broad range of capabilities, including legal research, document drafting, contract analysis, correspondence generation, document review and summarization.
In M&A transactions, where due diligence review plays a central role in shaping deal terms and risk allocation, AI legal platforms offer a particularly compelling advantage. These platforms allow attorneys to upload batches of contracts and generate contract review charts organized by key provisions specified by the attorney — such as change of control and assignment clauses, termination and termination penalty provisions, indemnification obligations and restrictive covenants, among others. AI tools can also flag contracts that are missing signatures or contain redactions — details that might otherwise go unnoticed in a large document set. This functionality significantly reduces the time attorneys would otherwise spend manually reviewing each contract and building a review chart from the ground up. These platforms can also distill lengthy contracts — often spanning 50 to 80 pages—into concise summaries that enable practitioners to quickly grasp the key terms and commercial purpose of an agreement.
Beyond contract review, AI platforms can analyze broader document sets and confidential information memoranda to identify, categorize and assess risks on behalf of the client. This capability proves especially valuable when deal teams operate under compressed timelines and need to surface potential issues for further review without delay.
Outside of the due diligence context, AI platforms can draft unique contract provisions tailored to the specific agreement between the parties — provisions that may not exist within a standard contract form. They can also retrieve standard clauses from a database and insert them into drafts, eliminating the need to manually search through a firm’s precedent files to locate a provision from a prior transaction.
Finally, AI platforms are proving to be remarkably effective proofreading tools. Many practitioners now rely on these tools to verify that defined terms are used consistently throughout a contract, to flag inconsistencies (e.g., alternating between “Buyer” and “Purchaser”), to detect conflicting provisions, to review notice periods and performance obligations for internal consistency, to identify missing boilerplate provisions (such as governing law, entire agreement, severability and counterparts clauses), to check formatting uniformity and to catch typos.
Putting it together
Consider a middle-market equity acquisition in which the target operates under several hundred vendor and customer agreements and has dozens of corporate governance and maintenance documents. At the outset, the seller’s counsel or in-house counsel for the target populates an AI-powered VDR, which automatically indexes and classifies the uploaded documents by contract or document type. The buyer’s deal team then exports those contracts into a legal AI platform, which generates a detailed review chart flagging key provisions: change of control provisions, termination rights, restrictive covenants and indemnification obligations.
The AI platform also identifies two contracts with missing signature pages and one partially redacted addendum, prompting targeted follow-up through the VDR’s Q&A workflow. The seller’s counsel is then able to review the outstanding diligence questions and link the responsive documents for the buyer’s review. As the deal progresses toward definitive documentation, counsel uses the same AI platform to draft a tailored earn-out provision and runs the near-final purchase agreement through the platform’s proofreading function to verify defined-term consistency and flag missing boilerplate clauses. From diligence through signing, the combined use of these tools improves efficiency, freeing the deal team to focus on substantive negotiation and client counseling.
The in-house perspective
For in-house counsel, AI tools designed specifically for the legal profession have the potential to meaningfully enhance both the capabilities of in-house legal teams and the dynamics of their relationships with outside counsel. Beyond the advantages discussed above, in-house teams stand to gain significant efficiencies in the execution of routine tasks, enabling counsel to reallocate time and resources toward higher-value work that demands the integration of legal judgment and business acumen. These tools can also strengthen the working relationship between in-house and outside counsel. As outside counsel teams leverage AI-driven efficiencies, the resulting gains can translate into reduced legal spend, accelerated timelines for transactional matters and a greater ability for outside counsel to concentrate their efforts on the complex, high-stakes issues where their expertise delivers the most value.
A word of caution
For all their promise and benefits, AI tools are not infallible, and review every output for accuracy remains critical. These tools may not always correctly classify or interpret documents, nor will they invariably produce appropriate or legally enforceable contract language. Human review remains essential, and practitioners should approach these tools with informed caution. While the benefits are substantial, the risks of relying on AI-generated work product without careful human oversight are equally real, as recent, well-publicized incidents have demonstrated. Additionally, we must remain aware of client confidentiality and data privacy obligations, ensuring that sensitive client information is not entered into any AI tools. Ultimately, AI is best understood as a powerful complement to skilled legal analysis — one that enhances an attorney’s ability to deliver thorough, efficient counsel but never replaces the critical thinking and professional judgment that clients rely on.•
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Montrose is a partner and Semsarieh is a senior managing associate in Dentons’ corporate practice in Indianapolis.
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