Data licensing in cross-border due diligence: what a foreign buyer will ask

The short answer: expect a data-licensing section in the request list

Acquirers have reason to ask about data licenses because the deals have become visible. When Reddit filed its IPO registration statement in February 2024, it disclosed data licensing arrangements entered in January 2024 with an aggregate contract value of $203.0 million and terms of two to three years. That figure is a multi-year contract total, not annual revenue, but the lesson for deal teams is plain: a company's records can carry contractual commitments that outlast a closing date, and the buyer's counsel will want to read them.

In a cross-border deal the questions usually arrive through the buyer's home-country counsel, sometimes in a translated request list, and they reflect the buyer's own regulatory instincts. A European acquirer may start with personal data. A strategic buyer with AI plans of its own may start with exclusivity. A financial sponsor may start with whether the payment belongs in run-rate earnings. Sell-side advisers who have answers in the data room on day one avoid a late price chip.

What a foreign buyer will ask, and what to have ready

Why ownership and privacy questions come first

Rights questions start with authorship. The US Copyright Office's circular on works made for hire explains that the employer, not the employee, is the author of a work an employee prepares within the scope of employment, while commissioned work from outside contributors qualifies only in listed categories and with a signed written agreement. Under 17 U.S.C. section 201, ownership can be transferred in whole or in part and exclusive rights can be held separately, which is why a target can license one use of its records while keeping others. A careful buyer will ask to see that analysis rather than assume it.

Privacy questions start with promises. FTC staff have stated that companies' promises not to use customer data for undisclosed purposes, such as training models, are enforceable wherever they were made. For an acquirer in Europe, the GDPR adds its own lens: it governs processing of personal data and can reach organizations outside the EU that offer goods or services to, or monitor the behavior of, people in the EU. Records involving such people raise questions even when the seller is a US company.

How the payment shows up in quality of earnings

How a data license is structured can affect when the seller recognizes the revenue. Deloitte's roadmap on identifying the nature of a license under ASC 606 explains the distinction between a right to use intellectual property as it exists when the license is granted, recognized at a point in time, and a right to access it over the license period, recognized over time. A buyer's financial due diligence team will ask which treatment the target applied, whether the auditor agreed, and whether the payment should be normalized out of run-rate EBITDA.

Companies that license through SourceX receive one all-in price as a one-time payment, typically within about 60 days of invoicing once the buyer selects the data. Expect the acquirer to treat that payment as non-recurring, and do not let the management case present it as a repeating line.

What sell-side advisers should prepare before the data room opens

1. Ask the CEO and CFO directly whether any records have been licensed, shared or sold for AI use, including pilots, evaluations and informal sharing with vendors.
2. Collect the executed agreement, every amendment, any order forms and the correspondence that defined scope.
3. Write a one-page summary covering licensee type, scope, exclusivity, field of use, term, territory, payment, delivery status and open obligations.
4. Add the data inventory and the redaction or de-identification specification agreed before delivery.
5. Have deal counsel read the change-of-control, assignment, confidentiality and survival clauses against what the buyer says it plans to do.
6. Agree the accounting position with the auditor and flag the payment in the quality of earnings work as non-recurring where appropriate.
7. Settle the disclosure schedule wording with counsel so the data-rights warranties in the share or stock purchase agreement match the facts.

Sequencing a license and a sale

There is no single right order. Nothing is binding until the company agrees price and terms and signs, and licenses are typically exclusive for AI training for an agreed term, so the timing choice is really about who carries that exclusivity.

• License before the sale. The cash is received and the records are documented, which helps diligence. The exclusive term then binds the buyer, so disclose early and explain the scope.
• Sell first and let the buyer decide. The acquirer keeps every option, but records can be lost if integration retires the target's systems before anyone takes an export.
• Run both in parallel. Workable only when the deal team, the buyer and deal counsel know about it; interim covenants may require the buyer's consent.

What this means for a cross-border M&A adviser as a referral partner

Cross-border advisers see a target's systems, records and timetable earlier than almost anyone. If a US client has 50+ full-time employees at peak (contractors excluded), several years of documented operations, the rights to license its records and an authorized sponsor, a license can be worth exploring either before a process or after closing. The guide to introducing US companies after closing covers the post-deal window, and raising data licensing with US portfolio companies from abroad covers sponsors based in Europe. For the buyer-side logic, see why AI buyers want licensed, consented data.

The adviser's role stays narrow: make the introduction and give basic fit information, never handle or describe the records. Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 per referred company, and the reward becomes payable only after the buyer pays and SourceX receives its fee. Check how any reward sits with your engagement letter and success fee, and read the clauses to check in a cross-border referral agreement before signing up. The page for M&A advisors covers fit and timing in more depth.

Limits and open questions

• The law on AI training is still developing. The US Copyright Office's AI initiative released its report on generative AI training as a pre-publication version in May 2025; it is a report, not law, and courts and other countries may take different views.
• There is no settled market wording for data-licensing warranties, so expect each buyer's counsel to propose its own.
• Exclusivity and field-of-use language differs between agreements; summaries are no substitute for reading the clause.
• Some buyers face home-country rules on receiving or moving data, which can shape what they ask for in diligence.

This is general information, not legal, tax or financial advice. Confirm with your own counsel, tax adviser or professional body before acting.

Next step

Add a data-licensing question to your standard sell-side preparation list. If a US client is a fit and wants to explore a license on its own timetable, register as a partner and make the introduction.