IP VALUATION

Client

Government Appointed Business Support Agency

Background

Metis Partners was asked to undertake a valuation of a pre-revenue renewable energy technology company (“Target Company”) on behalf of their investors. The Target Company was a developer and manufacturer of renewable energy technology which is capable of harnessing energy from naturally replenishing sources and converting it into electricity. The Target Company also provide related operations and maintenance, project development and feasibility and electricity products/services.

Assignment

The investors wished to gain an understanding of the present value of the intellectual property assets of the Target Company, as well as steps which could be taken to mitigate IP risks and thereby increase the valuation. In light of these objectives, Metis Partners undertook a “mini IP Audit” in order to identify the IP assets which underpin the Target Company’s competitive advantage, with a focus on identifying any areas of weakness and risk where IP asset value could be compromised. In addition we researched the status of their patent portfolio and carried out market analysis in order to contextualise the Target Company’s IP portfolio. We subsequently provided a valuation of the IP assets in order to support the Company’s value proposition as well as a report summarising the findings from our audit and market analysis.

Our Approach

Metis Partners’ Intellectual Property Discovery Exercise focussed on an on-site day with management and key personnel of the Target Company. Q&A and discussions were carried out to identify the business’s differentiation and competitive advantage and the IP assets which underpin its USP in order to identify any critical IP assets which could increase the valuation of IP vesting in the business. Additionally, the session helped identify weaknesses in the current IP management and protection programme which may mitigate or augment IP risk. Metis Partners discovered that, despite believing it had a robust IP strategy, the Target Company actually had significant gaps in its IP management strategy which exposed its critical IP rights to a substantial amount of risk, particularly in relation to trade secret protection.

Metis Partners subsequently carried out market analysis in order to understand the level of competition and patent profiling within the renewable energy sector. We also carried out a high-level patent portfolio analysis, including citation analysis and competitor landscaping, to ascertain the level of patenting activity in and around the Target Company’s particular technology.

Finally, financial analysis in respect of the identified IP assets was then carried out using the most appropriate financial modelling methodology, which in this case was both 1) a Relief from Royalty method, as well as, 2) a cost-based method, given the lack of significant commercialisation of the technology to date. The Relief from Royalty methodology used an independent, comprehensive and verifiable “royalty rate data” provider in order to identify licensing transactions and other agreements which may have aspects of comparability, and which can be used to assist in our valuation conclusions. The cost-based method considered a cost to reproduce the Target Company’s technology, taking into account factors such as obsolescence and time value of money. We also provided the valuation on a “distressed” basis, so as to ascertain the likely value the IP assets could achieve in the event of insolvency or accelerated sale

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The Outcome

Metis Partners’ IP Audit identified IP assets which the Target Company had previously overlooked and undervalued, as well as significant gaps in its management of IP, including a lack of trade secrets policy to protect the most unique and innovative aspects of its technology.  We provided the Target Company with a series of recommendations designed to improve their IP management strategy and provide investors with comfort as to the protection of critical IP assets underpinning the Target Company’s USP. The independent valuation of the Company’s key selected IP assets, both as a going concern and in a distressed scenario, provided against a contextual backdrop of the relevant market sector, provided the Investors with insight as to the Target Company’s value proposition and saleability of IP assets in various scenarios. Our IP asset maps identified the critical IP assets and our analysis of them allowed management to quickly recognise what improvements could be made in the short-term and longer term to improve competitiveness and increase the business valuation. We generated a quick action plan highlighting immediate IP risk improvements and IP management activities for the Company to focus on.

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