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Artificial Intelligence systems increasingly important for M&A due diligence: corporate lawyer

Another possible vulnerability when considering an acquisition is cybersecurity. It is a good idea to ask cybersecurity experts to identify potential weaknesses. Acquirers should be mindful of how security issues could impact the integrity of input data. “What protections are in place to ensure the integrity is preserved? That is important,” Di Giorgio says.

Any due diligence on acquiring an asset with an AI component should also look at the “highly specialized talent” that works with the system. “These are the data scientists and engineers who are critical to the model,” she says, “so you don’t want to lose them after the acquisition. If these employees were to leave, your AI model isn’t worth as much as it was. Despite the data, the people-related risks are a huge part of assessing any transaction.”

Finally, any due diligence involving an acquisition with an AI component should also identify the intellectual property rights that may exist, Di Giorgio says. “Is the data owned or licensed? Are there copyright or trade secrets protecting the component of the AI system that may not be registered in the appropriate jurisdictions?”

As an example, Di Giorgio says that if trade secrets protect an AI system, it is important that acquirers confirm that the target has taken precautions to ensure these trade secrets remain confidential, potentially through non-disclosure agreements.

“Has the acquisition target entered into agreements that they would need to with employees, with consultants, with suppliers, and customers to make sure that trade secrets are protected? That it remains confidential.”

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