AI Considerations in Government Contract-Related M&A Transactions
As general interest and investment in AI has accelerated since the initial public launch of ChatGPT, so too has the U.S. federal government both increased its spending in the area[i] and the speed with which it adopted guidelines on the utilization of AI more generally.[ii] This tracks other actions outside the U.S.,[iii] and anticipates corresponding initiatives at the state and municipal levels.[iv]
And while some government contractors are already growing their AI capabilities to capture AI-specific contracts,[v] we expect to see more intense focus on the utilization of AI more generally, such that the incoming raft of regulations will be front of mind throughout the industry. This emphasis will also extend to mergers and acquisitions, where a target’s utilization of AI presents several unique risks and considerations in an acquiror’s due diligence process (or a target’s preparation for a sale process),[vi] on which this note elaborates below.