It's been two decades since Intellectual Property (IP) and its development became a defining element in investment strategies for parties on both sides of the negotiation table. In the late 1990's, investors wanted their dot-com startup companies to have patents, as it would help the company appear innovative. Even after the dot-coms went bust, investors regarded IP as upside protection; meaning, if the company went under, the IP portion of the portfolio could keep the deal from being a complete loss. Investors, like Venture Capitalists (VCs), who got burned by multiple failed investment efforts, turned their interest towards start-up companies with a strong balance sheet versus those with no revenue potential. For example, if pre-investment research showed that the start-up had a Freedom to Operate (FTO), then IP became a more important consideration on an investor's check list.
POSTED BY John Cronin AT 12:20 P.M. Nov 20, 2018TAGS: John Cronin | Regulation and Legislation | Strategy | Trade Secrets | Valuation | Mergers and Acquisitions | Licensing | Patent Sales
How can tax accountants, wealth managers, M&A brokers, and business owners extract the most value from personal goodwill? Tax court decisions (Bross Trucking, Inc., T.C. Memo. 2014-107, and Estate of Adell, T.C. Memo. 2014-155) have demonstrated that sale of personal goodwill as a distinct asset, separate from corporate goodwill, can provide significant tax advantages for individuals. However, the decisions also illustrate the need for a robust set of justification for the value of personal goodwill in order to withstand challenges.
POSTED BY Seth Cronin AT 12:26 P.M. Jul 25, 2018TAGS: Trade Secrets | Valuation | Banking | Mergers and Acquisitions | Seth Cronin
On Thursday May 11th, ipCapital Group held its 13th Annual Thought Leadership Conference, bringing together innovation and intellectual property (IP) leaders from around the world in the picturesque Essex Resort & Spa in Northwest Vermont. This year’s conference theme was Effective Innovation - Transforming Ideas into High-Value IP.
POSTED BY ipCG Team AT 8:45 A.M. May 31, 2017TAGS: ipCG Team | IAM | Innovation | John Cronin | Strategy | Trade Secrets | Valuation
In this whitepaper, Adam discusses how VC investments can improve monetization options and mitigate risk when diligence considers IP assets from a holistic business perspective, beyond the traditional legal opinions.
POSTED BY ipCG Team AT 12:38 P.M. March 24, 2017TAGS: Adam Bulakowski | ipCG Team | Disruption | Process | Strategy | Valuation
Verizon was recently informed by Yahoo, a company they inked a $4.8 billion purchase of back in July, that in 2014, Yahoo's servers were hacked and over 500 million Yahoo user accounts loaded with personal data were stolen. Now, various reports in the news are suggesting Verizon is going to ask for a $1 billion reduction in the price of the deal. It is in a business's own best interest to handle this data as it would any other intellectual property, i.e., as a very valuable asset.
POSTED BY Charles E. Root Jr. MS. AT 9:59 A.M. November 14, 2016TAGS: Case Study | Valuation | Charles E. Root Jr. MS. | Data Security | Mergers and Acquisitions | Blockchain
POSTED BY Charles E. Root Jr. MS. AT 4:18 P.M. August 8, 2016TAGS: Valuation | Charles E. Root Jr. MS. | Mergers and Acquisitions
In this whitepaper, Adam connects market value to innovation-related growth potential, a practice that requires diligence beyond traditional analysis, particularly on knowledge intensive businesses.
POSTED BY ipCG Team AT 8:07 P.M. August 01, 2016TAGS: Adam Bulakowski | ipCG Team | Metrics | Valuation
In our October 15th blog post Don't Forget About the "Rembrandt in the Attic"?, we discussed how a failure to think strategically about IP may have been a overlooked factor in the financial collapse of Digital Domain Media Group (DDMG). DDMG as debtor in possession has now sought court approval to sell the 3D patents along with the company’s remaining assets. The assets will be auctioned in separate groups, with the six granted 3D patents and two applications sold as one group. For any parties considering making a bid for the 3D patents, one essential question must be asked: how much are these patents worth?
Over the past year, ipCapital Group has seen a dramatic increase in requests to value IP portfolios. The engagements range from advising on high-profile deals to supporting capital raises for small, private companies who have few assets other than IP. We continue to use these experiences and lessons as feedback to our methodology, which is critical as the landscape evolves. In our latest video, we highlight a few of those lessons.
POSTED BY Adam Bulakowski AT 11:15 A.M. Oct 24, 2012TAGS: Adam Bulakowski | IAM | Process | Strategy | Valuation
In February, Alcatel Lucent (ALU) initiated a corporate restructuring that included plans to license almost 9,000 U.S. patents. The license project was recently cancelled, because the assets have generated no cash over the past seven months. So, what’s next? Maybe an auction? If the quality and strength of these patents matches or exceeds competitor portfolios, then maybe now is the right time to establish a long equity position.
POSTED BY Betsy Nesbitt AT 3:24 P.M. September 25, 2012TAGS: Betsy Nesbitt | Strategy | Valuation
As a follow-up to the recent M&A post, this article examines common IP-related drivers of ROI, from the perspective of an investor, such as a private equity firm.
POSTED BY Adam Bulakowski AT 8:04 A.M. Jun 13, 2012TAGS: Adam Bulakowski | Commercialization | Strategy | Valuation | Mergers and Acquisitions
Inorganic growth strategies through M&A don’t always account for the potential of intangible assets. M&A teams that consider IP and other intangible assets both before and after a deal can improve success with more accurate pricing and more efficient value extraction.
POSTED BY Adam Bulakowski AT 8:35 A.M. Jun 7, 2012TAGS: Adam Bulakowski | Commercialization | Strategy | Valuation | Mergers and Acquisitions
Making the decision to invest in patented technology requires a manager to map and evaluate a series of decisions and uncertainties. Real options pricing can enhance IP valuations in situations where key assumptions regarding market, financial, and technology variables are identified and estimated with reasonable accuracy. When coupled with the income and other valuation approaches, such as comparable market transactions, options thinking can guide financial and strategic decision making.
Last week, Microsoft paid $1.06B to purchase and license about 1,100 AOL patents. Putting the issues of purchase premium and strategy aside for another discussion, this transaction presents an interesting case on IP value expectations and communications.
POSTED BY Adam Bulakowski AT 8:20 A.M. Apr 17, 2012TAGS: Adam Bulakowski | Valuation
Companies buy and sell intellectual property (IP), including patented technology, in all industries, ranging from high-tech products like semiconductors to relatively lower-tech products like non-durable consumer goods. Businesses can take advantage of these often fast-moving opportunities if they have the appropriate IP valuation tools. These tools are particularly important when market and technology uncertainties are highand managers need to model different market scenarios.
Over the past two years, ipCG completed several IP valuations in the IT industry. In most cases, our clients contracted the models for external purposes - to estimate IP value for M&A negotiations. However, work products generated significant internal benefits as well. We share this case study with you to demonstrate the many strategic and managerial insights that can be gleaned from thoughtful IP valuations.
The 25% rule is a rule of thumb used to estimate royalty rates for intellectual property (IP) licensing transactions by approximating the risk/reward relationship between a licensee and licensor. A licensee only pays a portion of profits to the licensor, because of the additional costs and uncertainties that it incurs to convert the technology in to revenue.
Risk factoring is critical to developing valuation models that work. By investing the time needed to develop thorough and effective risk adjusted valuation models, you significantly increase the potential that you will actually achieve the projected return on investment for your technology acquisition and make better, more informed business decisions.
Comparables are vital to determining what the market would likely pay for a company, technology, or Intellectual Property (IP) asset. While the market value is not necessarily what the asset is worth to your company, it gives you an idea of what competitors may be willing to pay and can provide insight that will inform your bidding strategy.
A Triangulation Approach to valuation looks at value in three ways: 1) modeling the value that the technology and IP provides for your company's intended use; 2) reviewing, risk-adjusting and use-adjusting the target's valuation, and 3) understanding market comparables.
Intellectual property (IP), such as a patent portfolio, is a critical intangible asset for innovative companies. However, IP presents management and communication challenges because few companies catalog their IP strategically or link its development to value creation, i.e. increased revenues or decreased costs.
IP valuation is complicated by a host of factors, such as accessing market comparables, determining IP risk, handicapping potential licensees, and calculating the uncertain economic benefits to be generated by IP assets. While many sources enumerate methods of IP valuation, few provide real-life applications or guidelines.
A valuation of a company's patent portfolio or of a specific group of patents is important in helping the company to determine the value of its portfolio in a licensing transaction or in the sale of the company. It is important for companies to understand the drivers of value within their portfolios and to understand the strengths and weaknesses of the portfolios.