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Client

Developer and manufacturer of motorcycle accessories

Background

The Company specialises in the manufacture of high-quality, high-performance chain lubrication systems for motorcycles. Following an extensive market research, the Company decided to capitalise on its expertise by expanding into a new market with a new innovative product. This was to be launched through a new operating company (“NewCo”) which would take over any R&D, marketing and sales in relation to the new product.

Assignment

As much of the initial work for the new product was carried out by the Company, management needed assistance in identifying the extent and range of any IP assets, currently vesting in the Company, which underpinned the new product and therefore needed to be transferred to the NewCo. The Company also needed to identify “platform” or shared IP which, if transferred, would undermine the Company’s own operations and therefore would have to be subject to a licence between the companies. Additionally, the Company required an assessment of the value of the identified key IP assets in order to guide the possible IP transfer/transaction value.

In light of these objectives, Metis Partners undertook an IP Audit in order to identify the relevant IP assets which would be relied upon by the NewCo, with a focus on identifying areas of weakness and risk where value could be compromised. We subsequently provided a valuation of the IP assets in order to support their transfer to the NewCo.

Our Approach

Metis Partners conducted a “Kick-Off” call with management, in order to get a baseline understanding of the business and its value proposition. This consisted of:

(i.)  a Company presentation followed by a Q&A session in which we focus on business differentiation and competitive advantage in order to identify any potentially valuable IP assets which may have been neglected/improperly managed by the Company in the past;

We subsequently carried out an on-site day with management and key personnel, which consisted of

(ii.)  a whiteboard session, in which we map the Company’s IP assets and link them to products/services as well as revenues and forecasts, which gives us the opportunity to “visualise” and agree the critical IP assets upon which the Company relies; and

(iii.) a group Q&A session with members of the Company’s key personnel, during which we run through our proprietary “Metisology” process in order to understand what other, if any, relevant and critical IP assets exist that have not yet been covered off.

Financial analysis with respect to the identified IP assets was then carried out using the most appropriate financial modelling methodology, which, in this case, was the Relief from Royalty method. To inform our valuation conclusions, Metis Partners utilised an independent, comprehensive and verifiable “royalty rate data” provider in order to identify licensing transactions and other agreements which may have aspects of comparability to the proposed transaction.

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The Outcome

Our IP Audit identified numerous IP assets underpinning key products both within the Company and within the NewCo, and identified those which would have to either be transferred or, conversely, licensed where they were in use by both companies.

The independent valuation of the Company’s key selected IP assets informed the purchase price of the relevant IP assets from the Company into the New Co.  In addition, we also provided the Company with advice on how to mitigate identified risks and improve the value of these IP assets in order to strengthen the NewCo’s overall value proposition and increase future IP valuations in advance of future fundraising.

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