AI risks in M&A transactions
An increasing number of businesses rely on artificial intelligence (AI) tools to generate consumer-facing content and administer internal operations. Therefore, when conducting due diligence, corporate counsel and risk professionals engaged in guiding M&A transactions for purchasers must be aware of the potential risks posed by the use of AI.
This is because AI is capable of producing unidentified or undisclosed liabilities – including but not limited to unauthorised disclosure of confidential information, copyright infringement, and unlawful discrimination – which a purchaser may inherit and ought to safeguard against via contractual provisions, especially considering AI’s status as an emerging technology with limited regulation and common law guidance.
Several organisations have initiated the implementation of AI tools for operational administration, including ChatGPT, Dall-E, and Fireflies, which may have an impact on the financial performance of an M&A transaction. AI aids in the optimisation of supply chains, recruitment procedures, calendar scheduling, and consumer satisfaction analysis on an internal level. AI can be utilised externally to generate recommendations for products, customer service protocols, and advertising and visual content. With the increasing adoption of these tools, the risks they present and the legal framework regulating those threats will further develop.
Consequently, with the increasing adoption and integration of AI by businesses in every sector, this technology poses a risk of disrupting the M&A process by introducing an unforeseeable component. In a newly published article, Liza Kirillova and Adam Binghamthus examine the implications of due diligence in the era of AI.
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