The Future of AI in Business Transactions

January 10, 2025 – The surge in AI adoption has significantly influenced corporate strategies, particularly in the realm of mergers and acquisitions (M&A). As companies scramble to leverage AI to enhance their competitive edge, M&A has emerged as a key strategy for acquiring related technology and talent.

The Role of AI in M&A

AI’s integration into M&A transactions involves acquiring technologies, skills, and processes that enhance AI capabilities. Nearly two-thirds of business leaders plan to leverage M&A to bolster their AI capabilities within the next year, with expectations rising to 70% over the next three years. While this represents a promising avenue for growth, challenges related to rapid market changes often lead companies to explore alternative strategies such as partnerships and third-party solutions.

Regulatory Considerations: The EU AI Act

The regulatory landscape for AI is evolving, notably with the introduction of the EU AI Act. This regulation categorizes AI systems based on perceived risk and mandates compliance, including human oversight and thorough documentation for high-risk technologies. Companies engaged in M&A must thoroughly understand these regulations when assessing potential acquisitions.

Legal and Compliance Risks

Engaging in AI transactions introduces legal complexities, particularly related to copyright and data ownership. Companies must ensure they possess adequate rights to the training data and outputs generated by AI systems to avoid liability risks post-acquisition.

Due Diligence and Mitigation Strategies

As the AI landscape continues to evolve, conducting meticulous due diligence has become essential. Companies are increasingly seeking advisors skilled in AI-related regulations to better navigate the complexities of transactions.

Private Equity’s Role in AI M&A

Private equity involvement in AI M&A has surged, providing necessary capital for growth. Despite fluctuations in available funding, the potential for efficiency gains through AI adoption remains a critical factor for investors.

Conclusion

While M&A represents a strategic route to enhance AI capabilities, companies must approach these transactions with caution, considering regulatory, legal, and compliance challenges to ensure successful integration of AI technologies.

For further insights, visit Dentons’ AI Global Solutions Hub.

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