Ip And m&A
“All the intellectual property forms during establish whether any third parties have an Internet domain name. Just because you own
mergers and acquisitions are exactly what people ownership interest in the patent estate. “During the trademark, it does not mean that the
are looking for—it’s key, it’s the crux move. M&A activity, quite often because you’ve got classic dotcom domain name linked to that
There’s nothing else really that you’re buying,” valuation models at play, you almost scare out
trademark will be automatically available. For
says Dan Trueman, an underwriter at insurer from the woods the people who want to attack
IP portfolios that involve huge amounts of data,
Kiln, who specialises in intellectual property,
that piece of intellectual property, because all of it is essential that systems are centralised so that
brand and reputation risk.
a sudden, it has an actual value that has been
existing IP can be accessed across the newly
publicly placed on it,” says Trueman.
merged company and to ensure that any new
Despite recognising its value in M&A, only
information is correctly filed.
32 percent of corporate respondents said they
Robinson at Deloitte adds that there are three
always explicitly value IP assets. Yet the majority
main ways to value assets such as licence rights
Unforeseen risks can still come up despite full
of those surveyed (80 percent) thought the
or brands. The first is the relief from royalty
due diligence. “When you’re valuing somebody
most common consequence of insufficient due
approach: in other words, if you didn’t own
else’s assets, there are always things that you
diligence was the failure to identify IP risks.
that asset, what would you pay as a percentage
don’t know the full story of,” explains Trueman.
of your profit or turnover to have the benefit
“Most of that can be managed by processes
Choice of valuation method can vary. Market
of that asset? The second is the excess earnings
and procedures to identify and categorise
valuations, cost-based valuations and income-
method: this is where a company seeks
the intellectual property and manage it going
based valuations are the three key methods, with
to identify the income stream that can be
forward. But there’s always going to be residual
income-based valuations being the preferred
associated with the use of that asset. Finally, he
risk...it could be an incorrect due diligence, an
choice in most M&A deals. “That basically looks
suggests the cost approach: if you didn’t have
error or omission during that due diligence
at what you think the present value of the future
a particular asset, what would it cost you to
process, or on the other side, it could be that
revenue you can generate from intellectual
buy it?
the rules have changed or a host country’s
property or revenue-generating assets is,”
government has got involved, deciding that
explains Trueman.
Checking IP rights extends beyond patents. this is a marquee brand that it wants to keep
Due diligence should be extended to the in some way.”
Ownership of assets, including patents and target company’s trademarks, trade secrets
trademarks, should be confirmed during and copyrights. It is also important to check
the due diligence process. It is important to that you will have the right to use a particular
www.worldipreview.com World Intellectual property review September/October 2009 13
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