legal focus 49 Technology transactions lead the way
Whileº corporate activity in the region continues to run in third gear, we’ve experienced a common trend where businesses based on good technology have had no shortage of suitors when it comes to M&A or venture capital transactions, writes Rob Hayes, corporate partner, Manches Thames Valley
In the past 12 months, the Manches Thames Valley corporate team has acted on over 20 tech-related venture capital transactions, acting both company- side and for investors. Deals include the €4 million refinancing of Veryan Holdings, the £5m Series ‘B’ funding of Helveta and raising further funding on an investment round led by Downing Capital for EPI Service.
On the M&A transactions side, we have acted on a number of technology-focused deals, including acting for the shareholders of Mettoni, a telecoms business based in Berkshire, on the sale of the company. Our Reading corporate team acted for Softalk, a Maidenhead-based software business, on the sale of its assets to Gordano.
Key to the success of these deals has been a good product, proven track record of the management and/or owners, strong and protected IP, a realistic price, realistic performance forecasts and access to funding.
A key factor in the majority of successful technology transactions is the strength of the target’s intellectual property protection and exploitation strategy. Chris Shelley, head of
• How much money has been spent on R&D in the last few years? Significant R&D spend should have led to the creation of IPR, which can provide further security for the lender if it has a freestanding market value and the IP could be sold alone, without the other elements of the business.
• Who owns the IPR and is there any IPR used that is not owned? Are there any challenges to the validity of ownership or any infringers of the IPR? A lender or purchaser will not want third parties to have any rights, which could be used to prevent the target company from carrying out profit generating business operations.
• Have all maintenance and renewal fees been paid to ensure protection of the IPR?
Manches’ Thames Valley IP team comments: “As a large proportion of the value in these companies lies in their intellectual property, investors and buyers are increasingly focusing their due diligence on the company’s IP position, assessing both the protection conferred by its own IP and its freedom to operate in the light of the other company’s IP.”
As part of its due diligence your corporate finance team should ask the following questions:
Civil justice system reforms - a denial
of justice? At the end of March the justice secretary, Kenneth Clarke, announced the first major overhaul of our civil justice system in 15 years, writes Rick Munro, dispute resolution partner and mediator at Lamport Bassitt
Kenneth Clarke said: “With no major reforms for 15 years, the civil justice system has got out of kilter. Businesses and other people who have been sued can find that spiralling legal costs, slow court processes, unnecessary litigation and the ‘no win, no fee’ structures, which mean greater payments to lawyers than to claimants, are setting them back millions of pounds each year.”
The government’s plans include:
• Abolishing the recoverability of success fees and premiums for insurance policies that cover the risk of losing and having to pay the opponent’s costs. Under the current regime, defendants must pay these if they lose. Instead, claimants will have to pay their lawyer’s success fees and insurance premiums.
• Allowing lawyers to charge their clients a percentage of the sum recovered, a system that has been operating in the USA for many years.
• Raising the maximum value for small claims from £5,000 to £15,000.
• Increasing the use of mediation. THE BUSINESS MAGAZINE – THAMES VALLEY – MAY 2011
The reforms appear to be ill thought out and politically motivated. The move is likely to save the Government millions of pounds in costs arising from medical negligence claims against the NHS and claims against local authorities.
Much is made of the alleged compensation culture and bonanza of success fees paid to lawyers. This overlooks the fact that when legal aid was removed as a method of funding litigation, conditional fee agreements (no win no fee agreements) were introduced by the Government as a means of allowing those not able to afford litigation access to justice. The theory was that the success fee charged by the lawyers on the winning cases paid for those cases where the claim failed and the lawyers went unpaid. There is little or no evidence that lawyers are earning more in this way than they would if they simply charged for each and every case, win or lose.
The reforms will reduce access to justice for many people and smaller businesses and reduce substantially the compensation they receive. Many more cases will fall within the small claims threshold. In these cases, the parties will not be able to recover costs, even if successful. They will
Rick Munro – an accredited mediator
be left with the daunting prospect of trying to conduct often complicated litigation without legal assistance or having to accept that being involved in litigation is going to cost them a substantial sum that they will never recover, win or lose.
A welcome development is the increased emphasis on mediation. There will be automatic referral to mediation in small claims cases and automatic referral to mediation awareness sessions in higher- value cases. Mediation, whilst slow taking off, has been a success story and should be encouraged further but, in those cases where a settlement is not possible, it is important that access to justice is still available.
Details: Rick Munro 023-8083-7755
rick.munro@
lamportbassitt.co.uk
Companies seeking to raise equity finance or sell off assets should spend time making sure their IP is secured by suitable agreements and/or ownership and investors should ensure appropriate due diligence is conducted by their corporate finance team before entering into any transaction.
Details: Rob Hayes 0118-9822647
rob.hayes@manches.com www.manches.com
www.businessmag.co.uk
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