Exploit IP to Maximise Deal Value

How is IP affecting M&A deals?

Clifford Chance’s ‘A Global Shift’ report highlights the impact IP is currently having on the M&A space. The international law firm, specialising in M&A, claims that IP is being used to drive deals in various ways, whether it be to increase deal values, adjust deal preferences or influence transactions.

The report calls IP ‘one of the most flexible and portable assets.’ It goes on to assert that it was the IP involved in deals like Coca-Cola’s takeover of Costa Coffee (simply the strength of the Costa brand) and CYBG’s merger with Virgin Money, that made sure they were among the largest deals of the year so far.

Businesses that are not operating in traditionally IP-rich fields, are beginning to catch onto the value held in their IP and are launching new licensing deals to create value.

The report also talks about how China has become a major acquirer of IP and should be considered as a source for buyers of licenses and other IP assets for anyone looking to sell. The government is toughening up Chinese IP regulations to help business acquiring IP to enjoy increased levels of protections through enhanced patent legislation and regulation.

Case Study

An example of a UK organisation realising the potential and value of its IP in the current business and technological climate is BBC Studios. BBC Studios creates TV programmes and feature films and sells content globally just as any other creative studio does. However, it has recently began to operate as a producer and distributor, which promotes its products through an annual ‘Showcase’ event.

The President of Global Markets for BBC Studios, Paul Dempsey, spoke to Television Business International about the latest Showcase event, explaining that it has recently developed “an expertise and sophistication in understanding the value of our IP across different windows”.

“We are clear in the way we look at different scenarios and how we exploit rights…” he added.
BBC Studios sold more than 2,200 hours of programming to Chinese mobile video platform Migu Video at last year’s event. It has also recently made a deal for over 600 hours of content with Chinese tech firm Tencent.

How to exploit your own IP to maximise deal value

It’s not just household names like the BBC realising the potential of their IP, smaller businesses are growing wise to the changing attitudes towards this non-tangible asset. But how do you, as a seller, successfully use your IP to drive deal value way beyond what you may have thought possible?

Protect your IP assets
If your IP assets are not protected, they may be of little value and could even present legal problems for potential buyers. We outlined one such scenario on a previous article on IP as an Exit Asset. You need to ensure that you have the correct patents for your intellectual property and that any agreements you enter into protect you if any misuse of your IP takes place at the hands of a licensee. Protecting your brand should be one of your priorities so ensure that any agreements include termination clauses in the event of reputational damage, for example.
Caveat: On occasion it may be advisable not to register a patent if by doing so, it reveals the ‘secret sauce’ to would-be competitors. Think Google’s search algorithm or Kentucky Fried Chicken’s batter for a more literal example. A good IP lawyer will give you advice here.

Maximise your IP’s value
This is a process that involves several steps. Firstly, it’s important to understand fully what IP you have and that it is properly registered and protected. You need to maintain confidentiality around your IP at all costs in order to retain its value and, finally, examine ways to create licensing deals that can generate new revenue streams from your existing IP with little or no additional investment from you. This is where the potential for massive gains lies.

Structure the deal in the right way
When selling an IP-rich business try to structure a deal to mitigate risks and maximise value. Buyers may want to include some element of deferred consideration, based on future performance of IP. If you are confident of the future value of your IP assets, this type of deal structure can help you to find a buyer that is willing to pay a premium.

Before you do any of the above, make sure you conduct an IP Audit. Basically that means identifying all significant IP in your firm. That’s everything from names, designs, trade secrets, processes, inventions and more. List and describe it all. This will form your IP Register. Make a note as to whether each IP asset is being used effectively. Find out whether external registration has been done. If not, ask whether you want to register it and then determine whether it can be registered.

In conclusion, now may be the right time to look at your Intellectual Property assets in a new light. Underestimating the value of your IP, whether that be your brand’s reputation, your patents or your market insights, is easy to do. However, buyers are increasingly open to paying big money for intangible assets that could generate ongoing sales or provide instant market access, for example. Just remember to keep your cards close to your chest and do everything by the book when it comes to protecting your IP, as you never know - it might just be your most valuable asset.


Also read: IP as an Exit Asset

Buying intellectual property out of a business administration

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