How to tell if an artificial intelligence company is worth buying
Artificial intelligence is expected to potentially contribute $15.7 trillion to the global economy by 2030, according to a PwC report. This emerging technology is poised to change the way people work and redefine how businesses operate.
So it’s no surprise that companies are investing in AI in big ways, with a record of more than 140 acquisitions of AI companies taking place during the first eight months of 2019.
But before jumping into an AI investment, it’s critical for business leaders to take a step back and form a deeper understanding of the technology to make sure it’s as good as promised. Further, they need to consider whether the technology will fit with their company’s overall goals and ask: What business problem could AI solve at my organization?
What to look for in an AI company acquisition
Companies should also factor the pros and cons of acquiring AI capabilities versus building them in-house, as highlighted in a PwC report on AI and M&A deals. For example, an acquisition can help companies put AI technologies to use in the market faster and remove dependency on third-party vendors.
Companies can also access talent that might otherwise be difficult to attract or grow organically. However, an acquisition may not perfectly align with an organization’s workflows, culture, or customer expectations. As such, companies need to evaluate whether the technology they’re considering will achieve their goals and enhance their business.
To thoroughly assess a deal, companies can pull on a diverse set of expertise, forming a team of financial experts, product managers, technologists, data scientists and others who can evaluate the AI target from different angles. Companies should also need to assess the quality of the data that powers the AI technology and determine if it will be able to evolve and improve over time.
Applying AI responsibly
Once a deal closes, the work doesn’t end. The rise of AI brings inherent challenges around trust and accountability with customers, governments and other stakeholders.
To mitigate these risks and to preserve a transaction’s optimal value, companies can develop an integration plan that includes ways in which the newly-formed company could apply AI responsibly. For instance, because acquisitions of AI companies typically involve data, buyers need to make sure the acquired company’s offering has cybersecurity measures in place and doesn’t invade customers’ privacy or cause public harm.
Moving AI forward
Whether an organization decides to build AI capabilities in-house or acquire them elsewhere, it’s worth remembering that the most valuable asset isn’t just the technology. It’s also the people who will develop, maintain and manage the technology. To put this in perspective, 93 percent of US and UK organizations consider AI to be a priority. However, 51 percent say a lack of the right AI talent stands in the way.
Since AI experts are in high demand, it’s critical for buyers to make sure the target company has the right talent and that they will be able to keep these employees and retrain them if needed. Even at PwC, we’ve disrupted our own business and emphasized new ways of working and upskilling to become more digitally savvy.
The sophistication of AI will continue to accelerate in considerable ways, making deals involving AI companies both a challenge and an opportunity. Companies will need to evaluate these transactions through a different lens or else their investments won’t generate the value they expect.