During due diligence, how do we handle a buyer's request to audit our proprietary AI operating systems and automation code without risking our intellectual property if the deal falls through?

Question

Tyler Smith · Accepted Answer

In an AI-powered operation, your custom agents, automated workflows, and proprietary databases represent a massive portion of your strategic value. Revealing this code during the LOI-to-close phase is a major risk. If the deal falls apart, a competitor or investor could walk away with your operational blueprint. To protect your intellectual property, you must structure a staged diligence process. Do not hand over the source code or proprietary prompt architecture in the first wave of requests. Instead, document the inputs, processing steps, and output efficiency as operational metrics on your Scorecard. Prove the business results first, such as a reduction in customer service response times or increased gross margins. When it comes to the technical audit, require the use of an independent third-party clean team. This clean team reviews the code and technical architecture under strict non-disclosure terms, confirming its validity to the buyer without showing the buyer the actual code. Structure this milestone as a specific Rock for your technology leader. Use your weekly Level 10 Meeting to monitor the flow of information to the clean room. Finally, ensure your LOI has strong, unilateral non-circumvent clauses that specifically protect your operational AI structures. By treating your technical assets with this level of operational discipline, you protect your competitive advantage while verifying your valuation to the buyer.