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Craig W. Adas, left, and Alex Purtill, right, of Weil Gotshal.

Although we are still at the relatively early stages of the commercialization of artificial intelligence (AI), it is clear that privacy and security considerations will be at the forefront of measures to regulate AI as industries increasingly adopt and integrate AI tools and store and utilize massive amounts of data generated through such tools. As acquirers of AI businesses struggle with how to properly value AI assets, potential liabilities associated with AI, including increased regulation, are making the valuation process even more challenging.

AI is a substantial and rapidly growing driver of M&A activity both in the United States and abroad. And new AI companies are being created and funded at a record pace. In 2017, investors poured $15.2 billion into AI startups, a 141 percent increase over 2016, according to CB Insights. That pace has continued into 2018, with Venture Scanner reporting that Q2 2018 saw a record $4.4 billion invested in AI companies, a 19 percent increase from the same period in 2017. During the first quarter of 2018, 20 percent of earnings calls of U.S. publicly listed companies discussed AI, according to a Bain & Co. study. Management and corporate development teams at companies engaged in a broad range of industry sectors are now encouraged to consider adopting AI solutions. The prospect of significant gains in efficiency and cost reduction, as well as concerns that competitors are investing in tools that could upend the status quo motivate this heightened interest.

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