An acquisition deal targeting Decart, an Israeli artificial intelligence startup, fell apart after the due diligence process surfaced complications and the company subsequently relocated its operations to the United States, according to Globes reporting published under the headline “Due diligence and move to US derailed Decart acquisition.” The collapse illustrates the growing friction between the speed at which AI ventures attract acquirer interest and the practical obstacles — regulatory, operational, and jurisdictional — that can unwind a deal before it closes. The development comes as policymakers on both sides of the Atlantic continue to debate how to handle cross-border transfers of advanced AI capabilities, a tension also visible in ongoing U.S.-Israel defense technology legislative disputes.

Decart had drawn acquisition interest based on its work in generative AI, an area attracting intense strategic investment from both commercial and defense-adjacent acquirers. The specific identity of the prospective acquirer, the financial terms under discussion, and the precise timeline of negotiations were not disclosed in full by Globes, and officials have not confirmed those details publicly. What the report makes clear is that the due diligence phase — the formal investigative period during which a buyer examines a target company’s finances, technology, legal standing, and liabilities — became the point at which the transaction began to unravel.

Relocation Adds Jurisdictional Complexity

A central complicating factor was Decart’s decision to move its operations to the United States. While such relocations are common among Israeli technology startups seeking access to larger capital markets and American enterprise customers, the timing introduced significant legal and structural complexity into the acquisition process. A company mid-relocation presents a more difficult target for due diligence: corporate registration, intellectual property ownership, employment contracts, and regulatory obligations may simultaneously straddle two jurisdictions, making it harder for a buyer to establish clean title over the assets it intends to purchase.

The Globes report did not specify which U.S. state Decart relocated to, nor did it detail whether U.S. government review mechanisms — such as a Committee on Foreign Investment in the United States screening, which applies when a foreign acquirer seeks to purchase a U.S.-based company with sensitive technology — played a direct role in the collapse. Officials have not confirmed any formal regulatory intervention. Nevertheless, the scenario reflects a pattern that has become more common as AI startups with dual-use technology potential attract scrutiny that earlier generations of software companies did not face.

Broader Stakes for AI Startup M&A

The Decart episode points to a structural challenge for the AI mergers and acquisitions market. Acquirers moving quickly to capture emerging AI capabilities increasingly find that the very qualities making a startup attractive — novel architecture, a small but specialized team, early-stage intellectual property — are the same qualities that create due diligence complexity. Ownership of AI-generated outputs, training data provenance, and export-control classification of underlying models are all areas where legal clarity often lags commercial ambition.

For Israeli AI firms specifically, the intersection of national security sensitivities, U.S. export controls, and Israeli defense technology regulations creates a particularly demanding compliance environment. Israel’s robust AI research ecosystem has produced a steady pipeline of companies with both commercial and defense applications, and the line between the two is frequently ambiguous enough to trigger additional scrutiny from buyers’ legal teams. Decart’s case, while not confirmed to involve defense applications directly, adds to a body of evidence that acquirers are increasingly unable to move as quickly as the underlying technology market demands. Globes did not report whether Decart is pursuing a new buyer or whether the company intends to continue operating independently following the deal’s collapse.