Client background

The client is a private equity firm that focuses on investing in family, founder and management-owned companies. They are headquartered in the Midwest and target thesis-driven investments in the U.S.

The business challenge

The private equity firm engaged Baker Tilly to conduct an artificial intelligence (AI) due diligence assessment for a new acquisition target. The target was a rapidly growing government contractor in a highly regulated environment. The primary challenge facing the private equity firm was understanding the AI readiness, maturity and capability of the acquisition target. Having this understanding was crucial for making informed decisions about the potential acquisition.

Due to the complexity of the target company’s operations and the regulatory landscape, the client required a comprehensive evaluation of AI integration, IT infrastructure and cybersecurity measures. The goal was to ensure that the acquisition would not only be technologically robust but also compliant with industry regulations. Baker Tilly's assessment provided the necessary framework to gauge the AI capabilities of the target company, thus enabling the client to determine whether they were acquiring a company capable of delivering a sustainable competitive edge.

Strategy and solution

Baker Tilly employed their AI readiness framework in this due diligence engagement to evaluate the maturity of the AI life cycle. This comprehensive five-part assessment delivered insights into the target acquisition company's maturity from both technical and risk perspectives. The five dimensions of AI readiness that were evaluated included opportunity discovery, data management, IT environment and security, risk, privacy and governance and adoption.

Along with the AI readiness assessment, Baker Tilly’s digital and risk advisory teams worked closely together to complete assessments of the target company’s IT and cybersecurity, application and data cycles to enhance the overall offering.

Baker Tilly compiled a report that provided a clear understanding of these three elements. The report highlighted advantages, gaps and challenges found during the assessments. It also provided recommendations and considerations for acquisition and post-acquisition to enhance the PE firm’s capability and round out the operational AI process and governance pieces.

The Baker Tilly team displayed a full readout of the report for the portfolio company to influence their investment decision with a complete understanding of what they are potentially buying. Moving forward, Baker Tilly will likely assist the portfolio company with post-close considerations.