A7 · Advisory
M&A AI Diligence
What the target actually runs, what it owes because of it, and which of its "proprietary AI" is a wrapper on an API with terms that break on change of control.
Legal checks licences. Tech checks the stack. Neither checks this.
Every deal team now asks what AI is in the target, and the existing workstreams do not answer it. Legal diligence checks licences. Technical diligence checks architecture and scale. Neither asks whether the target's hiring tool needed a bias audit it never had.
The specific surprises are consistent: a screening or pricing tool creating regulatory exposure the target has not recognised; a customer-facing model creating disclosure liability; "proprietary AI" that is a thin wrapper on a third-party API whose terms terminate or reprice on change of control; and training data whose provenance nobody can evidence.
Each of those has a price, and it is paid after close unless somebody looks before.
What you get
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AI inventory of the target
What the target actually runs, built from the data room and one management call, including the AI features inside third-party tools that never appear on a technology list.
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Red-flag list, ranked
Regulatory exposure by jurisdiction; licensing and change-of-control terms; data provenance and rights; key-person dependency on the people who built it.
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IC memo — one page
Written for the investment committee, not for the technical workstream. What was found, what it is likely to cost, and what to put in the SPA.
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Technical review of the top three systems
Deep review only. What the systems actually do versus what the target says they do.
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100-day integration governance plan
Deep review only. What has to be true about AI governance ninety days after close, sequenced.
Scope
Fixed on both sides. Anything outside it is a separate engagement, quoted separately.
Included
- Data room review
- One management call (screen) or interviews with engineering and compliance leads (deep review)
- AI inventory of the target
- Ranked red-flag list
- One-page IC memo
- Contract review of AI-relevant terms
- Sell-side variant: the same work, run to prepare the evidence pack before a process
Not included
- Technical or security diligence generally
- Valuation or quantification of the exposures found
- Post-close remediation
- Representations or warranties of any kind
- Case studies or references from prior deals — NDA-bound without exception
- Legal advice
How it runs
| Day 1 | Data room access. Request list issued to the target. |
|---|---|
| Days 2–3 | Inventory, contract and provenance review. |
| Day 4 | Management call. Red flags ranked. |
| Day 5 | IC memo delivered. |
| Week 2 | Deep review only: technical review of the top three systems, interviews, and the 100-day plan. |
Common questions
Our diligence window is shorter than five days.
That is why the screen exists at five rather than two weeks, and we can compress further if the data room is already open. Tell us the date the IC meets and we will tell you honestly what is achievable by then.
How does this sit alongside our technical diligence provider?
Alongside, not instead. They assess whether it works and scales; we assess what it obliges you to do and what breaks at close. We are happy to work directly with them, and generally the two findings lists should be read together.
Will you name prior deals?
No, not even anonymised. Deal work is NDA-bound and a firm that hints at prior transactions is telling you what it will hint about yours.
Can you do this sell-side?
Yes, and it is often better value. The same review run before a process gives you the evidence pack and lets you fix the two things a buyer would otherwise discount for. Same price.
What if the target won't answer?
Recorded as such, in the memo, with what the refusal implies. A target that cannot say where its training data came from has told you something.
Diligence findings are advisory observations based on materials made available within the engagement period. They are not legal advice, not a legal opinion on any contract, not a valuation, and no representation or warranty is given. No attorney–client relationship is created. Findings should be reviewed with deal counsel.
When does the IC meet?
Diligence arrives without warning. If a process is coming, tell us early and we will hold the week.