Hogan Lovells 2024-2025 AI Trends Guide - Flipbook - Page 16
Transactions
Getting deals done in a changing AI environment
AI technologies are attracting significant attention—including from large “serial acquirer” technology companies.
While acquisitions in the AI space are not particularly new, the acceleration and deployment of emerging technologies
require acquirers to consider how due diligence and deal terms should be adjusted, particularly with respect to
technology and related intellectual property rights. Some AI focus will likely become part of every technology company
acquisition, with more comprehensive reviews and deal terms for targets that provide AI products or depend heavily on
AI. Some key considerations for navigating AI in M&A transactions include:
Have a conversation
Consider regulatory compliance
A well-structured conversation with the target’s technologists,
businesspeople, and legal representatives is one of the most
effective diligence tools. This live conversation provides a
unique forum for real-time conversation, which for AI often
includes development of the target’s AI technology and models,
explainability and management of bias in modeling, and data
collection and use.
For technology companies using AI, a changing regulatory
environment will require a focus on compliance policies and
practices. Acquirers will also need to understand the use of AI for
purposes considered “high risk,” whether under new regulations
or existing laws. Any ongoing investigations, audits, and
complaints will be scrutinized, and acquirers will likely seek riskallocation provisions related to noncompliance.
Focus on data
Governments in many jurisdictions are now seeking to protect
and regulate transactions involving AI businesses using foreign
direct investment regulations, which are often drafted broadly to
capture the widest variety of transactions.
Improper collection, use, or transfer of data creates potentiallycostly problems and can even cause a deal not to go forward.
Each type of data may be subject to rights and restrictions
enforceable by others – such as copyrights, personal privacy
rights, contractual restrictions, and regulatory requirements. In
diligence, the acquirer should ask about the target’s data sources.
Question IP protection for target technology
Not all uses of AI will affect IP protection, but where a target has
actually used AI to create key technology, interesting questions
arise about the scope and strength of the IP rights available to
protect that technology. These questions could arise for outputs
of AI systems and also for trained AI models, especially if third
party data has been used for training purposes. In diligence,
acquirers will want to understand the sources of the target’s
innovation and competitive advantage and to what extent AI
generated key technology.
Additional
resources
Resource
2024 M&A Outlook
Our team is distinctively positioned to provide sophisticated
support as M&A transactions related to the evolution of AI
technologies as these technologies raise questions on data use,
create new IP risks and value, and attract new regulations. Our
mergers and acquisitions team is ranked among the Elite law
firms for Corporate M&A by Chambers USA, and our lawyers,
in collaboration with our IP, antitrust, trade, foreign direct
investment, privacy, and other regulatory and policy teams,
have acted as M&A counsel to many of the largest and most
sophisticated players in the technology sector.
Authors
John Brockland
Partner
San Francisco
Adrienne Ellman
Partner
New York and Boston
Simon Grimshaw
Partner
Birmingham
and London
Scott Loughlin
Partner
Washington, D.C.
Jane Ross
Office Managing
Partner
Silicon Valley
David Toy
Partner
Denver
