Ip And m&A
Ip fuels m&A
Intellectual property is increasingly becoming
a key acquisition target. For many companies,
M&A is often a cheaper and quicker route to
creating synergies and innovation than trying to
replicate IP assets from scratch. The challenge
for IP managers is to make sure that all the
assets are clearly identified and monitored so
that they can be used after completion. This can
be a difficult task for companies that maintain
portfolios containing thousands of live rights,
often managed by teams of IP attorneys and
administrators in different parts of the world.
“You want to know that, essentially, the business
that you’re buying has a right to use those assets
and that they are going to survive completion,”
advises Khwaja, “and that they won’t end up
being terminated or you won’t have to make
extra payments.”
services, automotive, consumer products and absolute critical asset,” says Khwaja. “While
Unsurprisingly, 2009 has seen a significant retail are the sectors seeing the greatest number you wouldn’t do patent validity valuations in a
deceleration in the number of M&A transactions. of distressed deals, according to the transaction typical M&A, because it’s extremely expensive
M&A volume so far this year has amounted services group at PricewaterhouseCoopers. and time-consuming and requires someone
to $1.3 trillion, down 38 percent on last year, who has technical competence in that field, if
according to Dealogic. The credit crunch,
Deals based purely on acquisition of intellectual
you were acquiring a life sciences company, it’s
brought about by the collapse of a number of
property could prove a tougher sell in the
something you should do.”
investment banks, has meant that less capital
current environment. “At the moment, the
has been available to finance deals, although
amount of M&A seems to be determined more
Valuing IP assets can be an expensive and
‘distressed opportunities’ are available for those
by whether banks are lending,” says Khwaja. “It’s
arduous process, but it is necessary to build up
with the funding and the appetite. Financial
a question of whether the banks are comfortable
a clear picture of what is being acquired. Often,
with fields of business that they might regard
the most valuable assets contained within a
as more speculative. It’s easy if you’re selling
company are not directly recorded. This is
“ deSpIte recOGnISInG
widgets to see what the assets are.
common with trademarks. “With Coca Cola, as
far as I’m aware, it doesn’t put on the balance
ItS VALUe In m&A, OnLY
“IP is sometimes more difficult to value.
sheet the value of the Coca Cola brand, and yet
32 percent OF
So where a bank is considering financing
that must be the key asset in that company,” says
cOrpOrAte
the purchase of a business whose key assets
Khwaja.
are various research projects and patents, patent
reSpOndentS [tO A
applications, knowhow and trade secrets, and
Andrew Robinson, lead partner in the valuation
merGermArKet SUrVeY]
the aim is to develop a drug that will possibly
group at Deloitte, says there are two main things
go to market in about 10 years’ time, that’s quite
to consider when valuing intellectual property
SAId tHeY ALWAYS
a speculative proposition.”
in the context of an acquisition. “One is how
expLIcItLY VALUe do intellectual property and intangible assets
Ip ASSetS. Yet tHe
There are some exceptions to that rule on a
contribute to and make up the value of the
big scale, however. The ongoing Pfizer/Wyeth
whole business; and secondly, what are they
mAJOrItY OF tHOSe
merger, worth $68 billion (£50 billion), involves
worth as individual asset items for your financial
SUrVeYed (80 percent)
complementary intellectual property portfolios,
reporting purposes. And then what valuation
tHOUGHt tHe mOSt
with Wyeth’s presence in biotech drugs and
techniques do you apply when you’re looking at
vaccines helping Pfizer to diversify. The merger
them under those two different circumstances.”
cOmmOn cOnSeQUence
will also help to protect against a drop in
OF InSUFFIcIent dUe
revenues when some of Pfizer’s more popular
He adds that it is also worth ensuring that
drugs lose their patent protection.
every angle is covered when considering what
dILIGence WAS tHe
intellectual property is considered for valuation.
FAILUre tO IdentIFY
Valuing intangible assets
“People automatically jump to the most obvious
Ip rISKS.”
ones—such as a brand or a licence right for
For any business, it is essential to build up an
pharmaceuticals—but there are a huge number
accurate picture of the intellectual property
of other intangible assets that build a business.”
being acquired. But this is particularly true for
companies that stake their future on the strength Robinson suggests that things such as customer
of their IP portfolio. “We do a fair amount of relationships and the workforce should also be
life sciences M&A, where IP obviously is the considered. “A large intangible asset in many
©iStockphoto.com / iLexx
10 World Intellectual property review September/October 2009 www.worldipreview.com
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