Technology: 4 things to consider before acquiring a tech startup

When you have the opportunity to merge or acquire a company whose technology you want, make sure you know what they own, how they own it and whether they can actually give it to you

Your business needs to grow, and the opportunity to greatly expand your web presence and profit just needs the technology of an upstart company. The upstart is willing to sell. The term sheet is done; now it’s time to move forward or walk away. How can you determine with any confidence whether you are buying the next YouTube, Android or Siri—or are you buying the next Autonomy?

From a technology IP standpoint, the answer is not always easily determined. Both technology and its corresponding IP are notoriously difficult to value, quantify and characterize. Unlike financial analysis, where accounts can be tabulated and a subscriber base counted, you can’t simply count the number of trademarks or patent applications and gain useful information. The most important thing to keep in mind is that both technology and IP exist to produce revenue, protect products or grow market share—just not for its own sake. Avoid getting caught up in the natural tendency to mistake activity for value or quantity for quality. 

Contributing Author

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Gregory Novak

Gregory V. Novak is the Chief Executive Officer and Managing Partner of Novak Druce Connolly Bove + Quigg. Mr. Novak serves as national intellectual...

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Contributing Author

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Aaron M. Levine

Aaron M. Levine is a partner in the Litigation and Patent Reexaminations Group and Co-Chair of Novak Druce Connolly Bove + Quigg LLP’s New...

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