Louis Lehot on Dealmaking in AI Era – 'Tougher fundraising climate but a richer M&A environment'

Foley & Lardner LLP partner Louis Lehot discussed the interplay between soaring artificial intelligence startup valuations, capital markets, and M&A in the Law360 article, “Sky‑High AI Valuations Are Reshaping Dealmaking Playbook.”

“For founders, it’s a tougher fundraising climate but a richer M&A landscape,” Lehot said, noting that recent lofty capital raises reflect investor expectations for “explosive growth and long‑term platform dominance.” While these valuations signal confidence, he cautioned that “such a steep multiple also highlights risk,” pointing to potential valuation resets if revenue slows or margins narrow. “Legal advisers should be watching for deal terms that hedge against that downside,” he said.

Lehot observed that funding at this scale “raise the bar for everyone,” concentrating capital around the major players and compelling smaller firms to demonstrate sharper differentiation to attract investment. “But it also creates more exit paths,” he continued. “Strategics and cloud providers are hunting for niche capabilities to bolt onto their platforms.”

Initial public offerings remain an option for certain high‑growth startups, Lehot said, noting that IPO readiness takes serious build up. “The bar for public market readiness has risen sharply, and many early-stage players are finding that M&A or acquihire exits offer faster, cleaner outcomes — especially in a market where talent is often the most valuable asset,” he added.