Artificial intelligence has officially moved from buzzword to boardroom and, whether we like it or not, into the valuation world. Why it matters is simple: AI can affect the subject company’s cash flow, growth and risk. But it also impacts the way we manage a valuation engagement.
AI can be useful in conducting business valuations by helping practitioners organize large volumes of financial and operational data, identify inconsistencies that may require follow-up, compare company performance to industry benchmarks and to accelerate the drafting of narrative sections such as economic outlooks, industry summaries and risk discussions. It can also assist with sensitivity analyses by quickly testing changes in assumptions such as revenue growth, margins or discount rates. That said, AI should be viewed as a tool to support the valuation process—not to determine value on its own. AI can process a lot of data quickly, but it still doesn’t know when management’s forecast is more optimism than analysis.
The reliability of any AI-assisted output still depends on the quality of the underlying data, the appropriateness of the valuation methods selected and the practitioner’s ability to challenge, refine and validate the results.
In practice, it’s a bit like a very fast intern. An unpaid intern. But it cannot replace human judgment. If the inputs are flawed, you just get a faster bad analysis.
Professional standards require a business valuation professional to apply sound judgment and support their conclusions. The practitioner, not the AI agent, is responsible for the conclusion of value.
It is also becoming increasingly relevant to distinguish between valuing a company that uses AI and valuing a company whose business model depends on AI. For some businesses, AI may simply improve efficiency by reducing labor hours, speeding up customer response times or improving forecasting. For others, AI may be central to the company’s products, competitive advantage and expected growth. That difference matters because it influences projected cash flows, capital needs, customer concentration risk, intellectual property considerations and the sustainability of any perceived advantage. In either case, the valuation professional still needs to evaluate whether the expected benefits are measurable, durable and appropriately reflected in the assumptions used.
So AI isn’t replacing valuation professionals. AI can help draft the story, but it still takes a valuation professional to know when the story doesn’t make sense. We practitioners still need to understand the business, assess its risks and use judgement in forming our conclusions. We can just do it a little bit faster with fewer excuses for getting it wrong.
Wondering how AI factors into the value of your business?
Whether you're evaluating AI investments, assessing growth opportunities, or simply trying to separate hype from reality, business valuation still requires informed judgment—not just faster analysis.
If you have questions about how AI-related assumptions may impact your company's value, drop me a line. You can reach me at lbell@meadenmoore.com or, if you're old school, give me a call at 216-928-5360.
