increasing frequency, intellectual property has become a bigger part of M&A
transactions. Intangible assets such as patents and proprietary industrial
designs have grown quite significant. In some cases, they’ve become more
important than physical assets when determining a value of a business.
likely, if you are in negotiations to sell your business to a potential buyer,
the deal that’s being put on the table includes clauses that will give them
access to your intellectual property.
due diligence is incredibly important on both sides of the coin, and must be
done with great care and detail. If you’re a buyer, you want to avoid any
possible infringement suits or being placed in a vulnerable position because of
weak patent or trademark rights. As a seller, you want to be prepared to
demonstrate the high value and safety of your company’s intellectual property.
Be Ahead of the Game
If you are
selling your business, you want to start preparing your intellectual property right
away before a buyer performs due diligence. Start by identifying and cataloging
physical evidence of intangible assets. You should interview employees and
consultants about potential licensable intellectual property.
reality, most owners don’t realize how much potential proprietary information is
being used on a daily basis. In many cases, no records have ever been created –
names of authors or inventors, dates of first use and supporting communications
start preparing early, you will be able to accommodate serious buyers when they
do request a preliminary report of the company’s assets. This will prevent any
unpleasant surprises revealed by a potential buyer late in the process that could
delay or derail altogether a deal’s closing.
Preparing Down to the Slightest
entertaining potential buyers, you should expect to answer a variety of
questions that’s related to your company’s ability to control its intellectual
property assets, the numerous protections that have been implemented and the
availability of key supporting documents such as trade name license agreements
and patent assignments.
these questions include:
- Have you secured intellectual
property protection in the United
States as well as appropriate foreign
countries by filing the necessary legal documents or registrations;
- Have you established a
properly prepared and recorded chain of title from each prior owner;
- Have any patents or trademarks
been challenged or disputed, and are they likely to be infringing on any
- Overall, do you have a strong
intellectual property portfolio that would stand up to legal challenge
against any patent or trademark claims;
- Have patent and trademark
protection processes been performed by legal counsel with a positive,
- Have you taken measures to
protect your business’ portfolio such as draw up non-compete agreements,
enforcement actions, product labeling and security of trade secrets;
- What intellectual property
licenses are relied on to run the business;
What portions of the
intellectual property portfolio have been licenses to others;
- What complimentary patents and
trademarks can be developed for the portfolio;
- What are the prospective untapped
markets for the intellectual property?
buyers won’t consider all of your intellectual property rights equally
valuable, the more important the rights, the more closely buyers will
scrutinize the assets.