Evaluating AI Risks and Opportunities in Software
Insights from Baird’s 2026 Private Company Technology & Services Conference
Assessing the scope and impact of AI transformation is far from straightforward. In many respects, AI is reshaping the traditional diligence playbook for strategics and financial sponsors. At the firm’s 2026 Private Company Technology & Services Conference, Baird Global Investment Banking hosted a panel discussion focused on how investors can separate signal from noise in assessing AI’s impact on software, technology and services companies.
The panel, moderated by Spencer Crawford and Matt Russell, both Managing Directors in Baird’s Software practice, featured insights from industry experts Kim Walters, Senior Managing Director, Crosslake Technologies; Mike Cashin, Managing Director & Head of Business Development, SAI Group; and Klaas Jakobs, Partner, EY-Parthenon, Software Strategy Group.
Key Takeaways
AI is Becoming the Primary Lens for Diligence
AI is one of the most important discussion topics in investor diligence. To successfully address the AI question, companies need to move past the AI-narrative and provide a detailed AI roadmap that articulates the AI-enablement of solutions and defends against any perceived risk from AI disintermediation. Details that might’ve been secondary in the past are now central discussion points earlier in the M&A process. Investors are showing a clear desire to understand concrete specifics around proprietary data moats, product architecture and data flows.
Investors Expect Both Internal and External AI Maturity
Investors are assessing AI maturity across multiple dimensions — both inside the organization and in the market.
Internally, they are evaluating in-house data science capabilities, the development of proprietary AI tools with meaningful use cases, the strength of underlying data assets and the extent AI is driving engineering efficiency.
Externally, investors are focused on whether AI solutions are delivering measurable customer outcomes, higher win rates, deeper workflow embedment and greater personalization. As Walters called out, “The traditional notion of software as a Service (SaaS) is going to be less and less emphasis on the first ‘S,’ more and more emphasis on ‘Service.’”
The “A” Profile – Top Financial Performance, AI-Driven Results
While metrics and financial performance remain critical, panelists emphasized that investors are increasingly focused on a clear articulation of defensibility and value creation – what some describe as a company’s AI shield and sword.
Defensibility stems from durable moats such as proprietary data, mission-critical workflows and deep customer trust. “What we look for more so than AI capability is that trust with the customer and who that customer base is,” said Cashin. When it comes to value creation, companies must demonstrate how they can leverage those moats to create differentiated value that is measurable and capable of commanding a premium.
Reasons for Optimism for Software Players (Despite Recent Market Turbulence)
Overall, the panel agreed incumbent software players are positioned to win as the AI transformation unfolds. While AI-native businesses are fueling the pace of innovation and competition, established players, particularly those that are a system of record or have defensible data moats, are well positioned to be AI-winners with continued product innovation. Jakobs highlighted, “In the software world, I think there is a lot of opportunity now for the established brands… buyers want to buy agentic AI capabilities from their current partners. Their relationships are entrenched. That’s an opportunity.”
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