Key topics in this section
What exactly is an acquirer buying today? Where is the value in the deals they undertake? Deal structures are having to respond to new thinking because technology is changing what buyers actually want to control.
The rationale for a transaction and the structure used to achieve it are no longer necessarily the same. In some technology-heavy situations, for example, the value is almost exclusively in tech talent (see section seven). In others, IP, data rights or a foothold in a strategic market is key — but other assets might, if anything, be a burden. That has several legal implications.
Define the technology value before choosing the structure
First, law firms need to help clients define the source of value before drafting begins. Is the buyer really trying to acquire a business, or to secure a team, a code base, a training data set, or a customer channel? The structure must align to that objective.
Share deals, asset deals, minority investments, joint ventures, commercial alliances, transitional services and long-tail earn-outs each allocate risk differently. In AI-related transactions, in particular, a variety of structures might be used to secure access; strategic value often sits across a stack of assets rather than in one acquirable corporate target.
Second, deals defined by technology issues often shift more responsibility onto legal diligence and drafting, because the value is less evident than in a straightforward acquisition. For software IP, for example – often a key asset sought by acquirers – the legal team needs to establish chain of title, confirm contractual assignments from creators, assess open-source exposure, test confidentiality protections and identify whether the rights are portable into the post-deal structure.
“If you did not correctly structure the acquisition not only from an IT perspective, but also from an HR perspective, you may lose a lot of money,” says Jean-Robert Bousquet Partner, M&A and Private Capital, in Paris, at Eversheds Sutherland. “If you lose either the IT rights, or the IP rights, or the data, or if you lose the people who have conceived it or know how to run it, you can lose a lot of money.”
The value of entity IP is increasingly in the copyright for code, rather than just its portfolio of trademarks. The legal question is not only whether title exists, but whether the people who created and maintain that code can be secured as part of the deal. That makes the employment, confidentiality and invention-assignment review part of the core value work, rather than routine legal hygiene.
Third, alternative structures increase the importance of post-signing operating arrangements. There’s a big difference between retention mechanics and operational continuity. Transitional services agreements (TSAs) remain crucial, particularly where technology infrastructure cannot be separated immediately.
In carve-outs where the technology function is completely woven into parent company code, disentangling of systems and specialist know-how is the first practical hurdle in the transaction. In those circumstances, the legal task is to ensure the TSA covers the systems, licenses, access rights, service levels, migration obligations and data protections needed to keep the carved-out business functioning while separation is completed.
Protecting technology value between signing and completion
Even cybersecurity considerations need to be weighed up in deal structure and progress. “We have worked for clients that have done their routine infosec tests; but they then repeat them in the gap period between signing and closing,” says Lance Phillips, Partner, M&A and Private Capital at Eversheds Sutherland. “We’ve had all sorts of debates about what happens if something comes up in that gap period. Can we terminate because we don’t want to be buying a business that’s been subject to a hack?” Deal terms should reflect these new uncertainties.
There is also a question of how AI will change the business model of a target company. We are seeing vendors having to get on the front foot and explain how their customer base will remain sticky, and why their proposition will remain relevant, rather than being eroded by general-purpose AI tools. The risk of this bleeding into deal terms is obvious.
The legal role here, then, is broader than drafting the share purchase agreement (SPA). Firms are increasingly being asked to translate strategic intent into a structure that delivers the technology capability the client is paying for.
That means spotting when an ‘acquihire’ rationale would be better served by retention-heavy contractual negotiations – or when a minority investment is the cleaner way to secure market access. Does the TSA need to carry more technology detail than usual? And might opaque IP or data issues make a nominally simple structure too risky?
Defining the assets and rights the buyer needs
Understanding the legal pitfalls of deals that will rely on technology factors is one thing; knowing that all the pitfalls are visible will depend on how well deals have been sourced, triaged, and their rationale defined.
For deal originators, technology is scaling up the ability to search and identify potential targets, not just in terms of likely candidates for, say, a buy-and-build strategy, but also businesses that meet much softer strategic requirements. AI makes it easier to widen the search from specific criteria to more speculative potential synergies. Deeper analysis of company supply chains, for example, even just with publicly available data, might reveal potential sources of value.
Despite reflecting fast-moving technological considerations, deal terms are themselves likely to remain fairly traditional. There are signs, though, that new technologies might enable more innovative deal structures in the future. Can we monitor performance in real time, using automated auditable ledgers, and structure contractual price variations after the event? What about regulators looking at deals in real time to assess their own conditions?
If transparency is one of the central tenets of a data-rich, granular enterprise management system, and low-cost, objective analysis is possible, why wouldn’t deal structures evolve to incorporate them? It takes us, potentially, to a world where an M&A deal isn’t just structured around equity and assets, but cashflows and even intangibles, such as software IP.
This becomes even more likely in a world where private capital has established a critical role in the overall M&A ecosystem. For these buyers – exposed to raw values at the fund level, not just strategic long-term synergies – downside protection is a compelling proposition. Any deal structure that can account for, say, externalities affecting post-deal value could be game-changing.
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