M&AI: AI Use in the Acquisition Context
Summary
Treat AI as a core due-diligence workstream in M&A and other transactions and identify the specific AI systems, their functions, and any third-party components. Assess whether AI is used in customer-facing products, internal operations, or decision-making, since each use case creates distinct regulatory and operational risks (e.g., hiring discrimination, shadow AI, regulated-industry compliance). Expect RWI underwriters to perform AI diligence and for policy exclusions to emerge, increasing buyer and seller scrutiny. When drafting representations and warranties, explicitly cover compliance with laws, IP ownership and licensing, data integrity and security, and the target's ability to maintain AI systems post-closing to manage transaction risk.