Hisham Abdulhalim is the Staff PM at Intuit. Ph.D. candidate and visiting researcher at INSEAD.
In the fast-evolving landscape of business, mergers and acquisitions (M&A) have traditionally played a key role in achieving growth, diversification and competitive advantage. However, the advent of large language models (LLMs) capable of generating software code is reshaping this narrative, prompting companies to reevaluate the strategic rationale behind pursuing mergers and acquisitions.
As organizations tap into the capabilities of these AI-driven technologies, they may find that they can replicate or enhance the technological advantages of potential acquisition targets through in-house development, thereby reconsidering the necessity of M&A. This shift leads to a greater emphasis on durable advantages that can truly differentiate companies in the market.
Rethinking The Need For Acquisitions
• Internal Development Vs. Acquisition: With LLMs enabling faster and more efficient code generation, companies can develop the software solutions they need without necessarily acquiring another firm. This capability decreases the urgency to pursue M&A as a means of accessing technology. For instance, a company looking to integrate advanced analytics into its operations can leverage LLMs to create these tools internally. The result is a more agile development process, reducing reliance on external acquisitions to meet technological needs.
• Cost Efficiency: Acquisitions often come with substantial costs—not just the purchase price but also expenses related to integration, staffing and aligning corporate cultures. By embracing LLMs, businesses can invest in developing their technological infrastructure in a cost-efficient manner. The ability to generate code on-demand means that firms can allocate resources more strategically, focusing on projects that offer the highest returns on investment without the complications of merging disparate systems.
• Speed And Agility: Mergers can take an extensive amount of time to negotiate, finalize and integrate, often leading to disruptions and delays in realizing benefits. In contrast, using LLMs enables organizations to rapidly respond to changing market conditions and customer demands. The agility provided by AI-driven software development allows companies to experiment and innovate more freely, making them more competitive without the burdens of a drawn-out M&A process.
• Customization And Flexibility: Pre-packaged solutions from acquired companies may not perfectly fit the unique needs of the acquiring organization. LLMs can produce tailored software solutions that align closely with specific business requirements, allowing for greater flexibility and customization than might be achievable through an acquisition. This ability to craft bespoke tools makes it unnecessary to secure these capabilities through mergers, especially when existing internal resources can be leveraged.
Durable Advantages Beyond Code Generation
While LLMs revolutionize how software can be developed, certain durable advantages are critical for companies looking to maintain a competitive edge. These advantages may influence decisions around M&A:
Brand Equity and Market Position: A strong brand can provide a significant competitive advantage that code generation alone cannot replicate. Companies with established reputations and customer loyalty may resist acquisition as they seek to capitalize on their existing market position rather than integrate new entities that could dilute their brand.
• Talent Pool: Access to skilled personnel can be a critical differentiator in the technology landscape. Companies often pursue acquisitions to gain specialized talent or intellectual property. While LLMs can aid in development, having a robust team with deep domain expertise remains essential for innovation and competitive positioning.
• Customer Relationships: Strong, established relationships with customers are invaluable. They yield insights into market trends and customer preferences that can’t be easily codified. Companies with existing relationships that foster loyalty and trust may prioritize engagement with their customer base instead of pursuing M&A, relying on their existing relationships to drive growth.
• Intellectual Property And Unique Business Models: Companies with proprietary technology, patents or unique business models that set them apart from competitors maintain a significant advantage in the market. Companies are likely to be hesitant about acquiring such firms, particularly if they believe they can independently develop similar capabilities without sacrificing their competitive positioning.
The rise of LLMs that can generate code is prompting a reevaluation of the M&A landscape. With the potential to create tailored software solutions in-house, companies are now able to meet technological demands more efficiently and effectively, lessening the dependence on acquisitions for growth.
While mergers and acquisitions remain viable strategies for many businesses, the emphasis on developing durable advantages—such as brand loyalty, talent acquisition, customer relationships—and unique intellectual property will define whether and when companies choose to pursue M&A in an environment increasingly dominated by AI-driven development capabilities. As organizations continue to adapt to these changes, the choices around mergers and acquisitions will increasingly reflect a landscape where innovation can flourish independently from traditional consolidation strategies.
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