Artificial intelligence (AI) is revolutionizing how companies are valued, particularly during mergers, acquisitions and private equity investments. The conventional approach to due diligence, which primarily emphasizes financial performance, operational efficiency and existing technologies, is no longer adequate. With the potential for AI to disrupt established business models and transform entire industries, it’s crucial for deal teams to evaluate a company’s AI maturity through seven critical dimensions: strategy, adoption, governance, risk and compliance, people, products and services, and partners and platforms. This holistic assessment helps investors understand current capabilities and prepares them to identify potential threats posed by AI-driven competitors, automation and evolving customer expectations.

As AI continues to accelerate innovation and market disruption at an unprecedented rate, the urgency of this information cannot be overstated. It highlights the necessity for skills in developing AI strategies, preparing for regulatory changes, managing talent, and evaluating technological infrastructure and partnerships. Both buyers and sellers have practical steps to take. Buyers should validate AI capabilities, benchmark against emerging AI-native competitors, and anticipate disruption scenarios. Sellers need to enhance their AI narratives, strengthen governance, and bolster data infrastructures. Investors must look beyond a company’s current state and consider its future potential as AI reshapes the competitive landscape.

Key Takeaways:

• Assessing AI maturity through seven dimensions is vital for accurate valuations and mitigating risks.
• Traditional due diligence approaches fall short in the face of rapid AI-driven transformations.
• Future-focused strategies are essential for both investors and companies to harness AI opportunities and address associated risks.
• Strong AI governance, talent development and infrastructure readiness are key drivers of favorable valuations and seamless transactions.