Data & AI Due Diligence

The data & AI due diligence assesses the substance of a target’s data- and AI-driven value creation. The focus is on the value of the data assets, the level of AI readiness, the quality of algorithm IP, ML models and data pipelines, and the effectiveness of data governance, including EU AI Act compliance. The result is a robust classification of the monetisation potential and scalability of AI use cases – as a well-founded basis for business-plan validation.

Context and relevance

Data and AI are increasingly structural value drivers of digital business models – particularly in technology-oriented targets. The question of whether data assets are valuable, whether the organisation is technologically AI-ready, and whether algorithm IP and ML models can create long-term competitive advantages is, for investors, no longer secondary but part of the core assessment. At the same time, regulatory requirements, particularly EU AI Act conformity and GDPR compliance, increase the need for a structured data-governance assessment. On the basis of a clearly defined framework, FOSTEC & Company assesses the value, risks and scalability of data foundations, models, pipelines as well as governance and compliance (Figure 1: Framework for analysing the value, risks and scalability of the data & AI due diligence).

Our approach

The analytical approach is modular in structure and geared towards investment relevance. It comprises four core modules:

1. Data asset valuation

• Assessment of the quality, granularity and currency of the data inventory
• Examination of potential bias and legal risks with regard to ownership, licences and usage rights
• Assessment of growth potential and monetisation paths, for example through data products, insights services or embedded analytics

2. AI readiness score

• Analysis and assessment of the AI strategy and the overall MLOps process
• Assessment of roles, responsibilities and decision-making paths
• Assessment of technology enablement (data access, tooling, cost/scaling), skill gaps and the organisation’s digital maturity

3. Algorithm IP assessment

• Assessment of the substance, defensibility and sustainability of the algorithm IP
• Analysis of the model portfolio by maturity, performance and robustness
• Risk analysis of IP position, dependencies on third-party and foundation models, licence terms and replicability

4. Data governance gap analysis

• Assessment of the internal data and governance infrastructure, including policies, allocation of roles, cataloguing, access controls and audit capability
• Analysis of regulatory requirements along EU AI Act classification, documentation and transparency obligations, and human-oversight obligations
• Examination of legal compliance aspects, particularly GDPR conformity and copyright requirements.

Figure 1: Framework for analysing the value, risks & visibility of the data & AI due diligence

Results and impact

Clients receive a data-driven, differentiated assessment of the target’s AI and data architecture: monetisation potential is quantified, the scalability of AI use cases is assessed, and regulatory risks are evaluated in a structured way. The analysis provides a clear classification of whether data assets and algorithm IP hold up as sustainable competitive advantages – and identifies fields of action that are relevant to the investment case and post-merger integration.

For PE investors, the data & AI due diligence thereby becomes a central assessment module that evaluates a target’s technological substance beyond conventional financial metrics. While the IT & technology due diligence analyses cloud architecture, system stability and technical debt, the data & AI due diligence focuses on the substantive quality and strategic viability of the data and AI assets.

Position within the service portfolio

The portfolio of due diligence services comprises offerings of varying scope and focus. FOSTEC & Company provides 360-degree due diligence services for the analysis of all business aspects:

• Commercial Due Diligence
• Digital & E-Business Model Due Diligence
• Technology, Data & AI Due Diligence
• Organization & Talent Due Diligence
• Merger & Acquisition (M&A) Advisory
• Value Creation & Exit Readiness
• Carve-out & Post-Merger Integration

Find out in a personal introductory conversation how FOSTEC & Company robustly classifies a target’s data- and AI-based value creation – get in touch with us.