By identifying and cataloguing critical IP assets owned by your company and the important role they play, buyers’ perception of value is increased from its initial balance-sheet only calculation. Buyers often focus their pricing/valuation on the risks associated with acquisition, and in IP-rich companies those risks frequently relate to: 

  • IP assets not being properly recorded or “locked down” 
  • Issues with software and risks regarding 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 and safeguards in place 
  • IP housekeeping issues which emerge during the process, and serve as evidence of possible further IP issues that may threaten the deal or give an excuse for purchaser “price chipping” 
  • IP value in joint ventures or partnerships which is often undervalued and the value needs to be outlined to the purchaser 

A SWOT analysis on the key IP assets underpinning your company’s competitive advantage can inform and improve the valuation by: 

  • Recording 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) that may exist, and protect them accordingly 
  • Implementing a trade secrets policy in order to protect non-patentable and crucial IP (e.g. product recipes), and incorporate appropriate terms around these trade secrets into employee contracts/procedures 
  • Recording critical know-how in a user friendly format (FAQs, best known method, technical libraries) 

A buyer would normally value a target on typical financial model for the sector (x times turnover or EBITDA) and then price chip, discounting this for perceived risk. 

Your company can de-risk an acquisition for a purchaser and make it easier for them to see why they should pay a premium for your business – i.e. by focusing on the IP assets that underpin your competitive advantage and are not reflected in the financials/balance sheet.