We help companies improve the sale price and £valuation of their business in advance of exit, although our work is often triggered after an initial approach to buy the business has been made.
By cataloguing a company’s critical IP assets and highlighting their importance to the business’s overall competitive advantage, we are able to improve buyers’ perceptions of a company’s valuation. Buyers often focus their pricing/valuation on the risks associated with the acquisition, and in IP-rich companies these risks generally centre on:
IP assets not being properly recorded or ‘locked down’
Issues with software and risks related to the use of open source code
Threat of key people leaving and taking critical know-how (e.g. product recipes, source code, technical specs) with them without relevant controls & safeguards in place
IP housekeeping issues which serve as evidence of possible further IP issues which may threaten the deal or give an excuse for purchaser ‘price chipping’
IP value in JVs or partnerships which needs to be outlined to the purchaser as it is frequently undervalued
We can quickly do a SWOT analysis on the key IP assets which underpin a company’s competitive advantage and make recommendations which can be quickly implemented to boost the valuation. These can include such recommendations as:
Record any crucial trade secrets (e.g. an algorithm or decision tree, key data on sensor positioning, key properties of a surface material / technology, secret recipes, database architecture & analytics) which may exist and protect them accordingly
Implement a ‘trade secrets’ policy to protect non-patentable and crucial IP (e.g. product recipes), and incorporate these into employee contracts / procedures
Record critical know-how in a user friendly format (FAQs, best known method, technical libraries)
By quickly implementing our recommendations, companies can de-risk an acquisition for a purchaser and make it easier for them to see why they should pay a premium for the business (supported by the IP assets which underpins its competitive advantage). A buyer would normally value a target on a typical financial model for the sector (x times turnover or EBITDA) and then price chip, discounting this for perceived risk. Our approach, however, is based on the premise that the financial valuation is the baseline, and a premium has to be paid above this baseline for the well protected IP assets in the business, as these are not reflected in the financials / balance sheet.