Generative AI transforms contract drafting and risk review in M&A deals
Generative AI automates contract drafting and risk analysis, changing deal lawyers’ workflows.
Why it matters: Deal lawyers face new efficiencies from AI but must manage risks of inaccurate outputs and confidentiality gaps. This shift affects legal work quality and client trust in mergers and acquisitions.
- AI assists with drafting contracts, reviewing due diligence, and summarizing records in M&A transactions.
- Generative AI helps identify risks early and supports post-closing legal tasks, enhancing deal efficiency.
- AI outputs can include false or fabricated information, leading to legal sanctions, such as a June 2026 case where four lawyers were disqualified and fined $8,000 for submitting AI-generated arguments with fake citations.
- Using AI-generated documents may risk losing legal privilege protections, threatening confidentiality in deals.
Generative AI tools are now common in M&A practice, improving how lawyers draft contracts, analyze risks, and organize voluminous due diligence records. These solutions speed up early deal phases by highlighting potential risks and later aid with follow-up legal duties after closing (Buchalter, Abrams Law).
However, AI-generated content can be convincingly wrong, producing false contract summaries or made-up regulatory references. The International Bar Association warns that this threatens deal reliability and could cause costly errors (IBA).
Such risks became real in June 2026, when a federal court disqualified four U.S. lawyers and collectively fined them $8,000. Their AI-generated briefs contained fabricated legal citations, violating trust in judicial filings (TechRadar).
Additionally, documents created via AI may not qualify for legal privilege—a protection that keeps communications confidential. Losing this privilege can expose sensitive deal information and weaken dispute defenses (Axion Lab).
Experts stress that lawyers must actively supervise AI use. Understanding AI capabilities and flaws is crucial to verify accuracy and maintain client trust. The Thomson Reuters Institute advises that counsel gain foundational AI knowledge while remaining cautious. As legal technologist Meganne Thaxton highlights, AI advances deal work but demands careful scrutiny from lawyers.
By the numbers:
- 4 lawyers disqualified — for submitting AI-generated false citations in June 2026
- $8,000 total fines — imposed on disqualified attorneys due to AI misuse
Yes, but: While AI improves efficiency, its errors and confidentiality risks require strict human oversight to prevent serious legal consequences.
What's next: Law firms and legal departments are expected to develop AI use policies and training emphasizing output verification and privilege protections.