Future trends in AI dealmaking forecast

The landscape of AI dealmaking is rapidly evolving, influenced by factors such as geopolitics, regulation, and the technological capabilities of nations. Recent comments from Alex Shandro, Will Samengo-Turner, and Aoife Mac Dermott, Partners at A&O Shearman, shed light on a "diligence cycle" that is likely to emerge in the industry by 2026. They assert that while the hype surrounding AI remains significant, it will be tempered by the requirements of increased oversight and careful scrutiny of AI asset valuations.

One of the principal themes is the geopolitical landscape driving innovations and integrations. Countries aspiring to achieve AI sovereignty, including the UK, Canada, and India, will pursue strategic collaborations to bolster their tech capabilities. This approach means navigating a paradox of needing to rely on US or PRC technology while striving for independent AI infrastructures. The partners state that "geopolitics will continue to be a driver for deals as nations balance AI sovereignty policies with inescapable reliance on US or PRC tech."

Furthermore, regulatory bodies are expected to increase their scrutiny of AI-related mergers and acquisitions. The anticipated tightening of oversight will affect everything from minority stakes to full-control structures, causing higher barriers for compliance and slower deal timelines. Investors will be more cautious, questioning the "replaceability risk" of models and prompting deeper investigations into AI capabilities. The partners noted that "buyers will price-chip or carve out where claims on 'AI capability' lack verifiable evidence," emphasizing the critical need for transparency regarding training data provenance.

In terms of valuations, the future of fundraising will be affected by the perceived risk of AI models being replaced by emerging platforms. An increased focus on sectors like data centres, chips, and energy will also play a significant role in shaping the deal flow landscape. Investors are expected to move towards solutions that offer concrete control and strategic rights rather than merely seeking exposure to established brands.

Legal considerations will also shape AI's future, especially as copyright infringement becomes a growing concern. Stricter regulations under the EU AI Act may create disparities in the market, where compliant vendors command premium valuations while non-compliant ones face extended sales cycles and reduced multiples. As emphasised by A&O Shearman, "investors’ perception of regulatory environments will subtly shift," indicating a broader recognition of regulatory frameworks as potential catalysts for innovation.

Overall, while the excitement around AI remains palpable, a more cautious and methodical approach is emerging as stakeholders readjust to new realities in dealmaking and regulatory landscapes.

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