Leveraging AI for Contract Harmonization – Mergers and Acquisitions

Mergers and acquisitions (M&A) are powerful growth strategies, but they come with significant operational complexity. Among the most critical and often underestimated challenges is contract harmonization: the process of aligning disparate legal agreements across merging entities to ensure consistency, compliance, and operational continuity.

This case study explores how a strategic application of Artificial Intelligence (AI) enabled a seamless contract harmonization process during the merger of two industry leaders, one in safety, specialty, and industrial services, and the other in fire safety and security solutions. By leveraging AI, the Avasant Procurement Services Team not only overcame major obstacles but also set a new benchmark for efficiency, accuracy, and strategic alignment in M&A execution.

The Merger: Background

The merger aimed to create a dominant force in the safety and security sector by leveraging the complementary strengths of both organizations to expand market reach, enhance service offerings, and drive operational efficiency. However, integration efforts were quickly challenged by the complexity of harmonizing over 100 IT supplier contracts, each with distinct terms, jurisdictions, and compliance requirements. Avasant conducted a comprehensive review of each contract to evaluate its full life cycle and facilitated the transfer and consolidation of necessary contracts under the acquiring company’s ownership. Then, established a centralized contract repository, ensuring accurate filing and maintenance of all contracts and related documents from subject matter experts (SMEs).

Challenges in Contract Harmonization

Avasant hit a major roadblock when we discovered that essential contract documents were missing, halting our progress. In response, Avasant shifted its focus to building a centralized document repository. This required a deep dive into both organizations to locate and compile existing contracts. The experience revealed a significant gap in document management and highlighted the urgent need for better systems to ensure accessibility and continuity moving forward.

Contract harmonization during M&A involves identifying, analyzing, and reconciling discrepancies in contracts to create a unified framework. For the merger, the key challenges included:

• • Volume of contracts: Both companies managed over 100 IT contracts, making manual review and harmonization time-consuming and prone to errors.
  • Missing documentation: Critical contract documents were scattered or missing, halting progress.
  • Complexity of terms: Contracts contained diverse terms and conditions, including jurisdictional variations, pricing models, and service-level agreements.
  • Compliance risks: Ensuring compliance with regulatory requirements across multiple jurisdictions was critical to avoid legal and financial penalties.
  • Timeline constraints: The merger required rapid integration within three months to realize synergies and deliver value to stakeholders.

Traditional contract review and harmonization methods couldn’t keep up with the scale and complexity of the merger, since a traditional contract analysis took approximately one to two days to complete. Faced with these constraints, Avasant recognized that a conventional approach would not suffice. A transformative solution was needed, and AI was the answer.

Figure 1 illustrates the transformative benefits of AI in procurement. AI-driven methods significantly outperform traditional approaches in terms of speed and scalability, enabling faster harmonization across large contract portfolios. AI also enhances accuracy and reduces compliance risks through intelligent analysis and pattern recognition. While traditional methods are resource-intensive and heavily reliant on manual effort, AI reduces operational load, freeing up valuable time and resources. Most importantly, AI unlocks strategic value by generating actionable insights that support smarter, data-driven procurement decisions.

Leveraging AI for Contract Harmonization

To address these challenges, Avasant turned to AI-powered solutions. The AI tools quickly and accurately processed large volumes of contracts, identifying discrepancies and extracting key information. AI also performed in-depth contract analyses and recommended effective harmonization strategies. The following AI-driven approaches were implemented:

1. 1. Contract Analysis and Extraction
      Avasant leveraged AI-powered natural language processing tools to streamline contract analysis across multiple formats and languages. We initiated the process by uploading Master Services Agreements (MSAs) into the client’s AI platform and ensuring alignment with the client’s contract deviation matrix, which outlines preferred positions on key terms. Avasant’s custom prompts enabled a focused, risk-based review that flagged deviations, referenced page numbers, and recommended next steps. The AI-driven approach accelerated the identification of negotiation priorities and supported consistency with the client’s M&A goals. Building on this success, Avasant expanded AI usage to generate supplier templates, draft communications, and create reporting tools, enhancing both efficiency and standardization.

1. 2. Automated Risk Assessment
      AI systems were employed to assess the compliance and risk implications of contractual terms. By cross-referencing contract data with the client’s contract deviation matrix along with regulatory requirements, the system flagged potential compliance risks and suggested modifications to mitigate them.

1. 3. Clause Standardization
      One of the primary goals of contract harmonization was to standardize clauses across contracts to create a unified framework to facilitate the transfer and consolidation of required contracts under the Acquiring company’s ownership. The AI tools were used to identify frequently occurring clauses and recommend standardized language.
      For instance, AI suggested uniform indemnity clauses and non-compete agreements, reducing ambiguity and ensuring consistency across contracts. The standardized clauses reduced legal risk, shortened negotiation cycles, and empowered the Team to make faster, more confident decisions based on clear and consistent contract terms.

1. 4. Predictive Analytics for Decision-Making
      Avasant used AI-driven predictive analytics to assess how contract changes could affect operations and financial performance, enabling leadership to prioritize harmonization efforts. By uploading the MSA and internal deviation matrix into the AI tool, each clause was systematically reviewed, deviations flagged, and actionable recommendations generated. These insights directly informed the strategic pipeline summary and merger strategy. The AI tools also accelerated contract harmonization by identifying discrepancies in key clauses, flagging compliance risks, and standardizing language. Integration with existing systems supported real-time collaboration, ultimately speeding up negotiations and improving decision-making across the merger pipeline.

Results Achieved

Figure 2 depicts the results achieved by the implementation of AI for contract harmonization during the merger:

The implementation of AI in contract harmonization significantly accelerated the review process, cutting time by over 80% while reducing legal costs and improving accuracy by 85%. This intelligent, transparent approach also ensured regulatory compliance and strengthened stakeholder confidence in the merger’s success.

Broader Implications for M&A

The success of the merger highlights the transformative potential of AI in M&A processes. Key takeaways include:

• • Scalability: AI can handle large volumes of contracts, making it suitable for organizations of all sizes.
  • Adaptability: AI tools can be customized to address industry-specific challenges, ensuring relevance and effectiveness.
  • Collaboration: By integrating with existing systems, AI fosters collaboration among legal, compliance, and operational teams.
  • Future-Proofing: AI enables organizations to adapt to evolving regulatory requirements and market conditions, ensuring long-term success.

The merger’s success highlights AI’s transformative role in modern M&A. Its scalability enables efficient handling of large contract volumes, while seamless integration with existing systems enhances collaboration across legal, compliance, and operations. AI’s adaptability and continuous learning help organizations stay agile amid regulatory and market changes. This case demonstrates how AI turns contract integration from a complex challenge into a strategic advantage, accelerating integration, reducing risk, and setting new benchmarks for operational excellence.

By: Denzil Rajack-Prayag, Sr. Procurement Specialist