Intellectual property drives M&A transactions

IP plays an increasingly important role in mergers and acquisitions, says Don Fancher of Deloitte

Don Fancher, principal in the Deloitte Forensic practice of Deloitte Financial Services

The financial downturn of 2008 had ramifications across the business landscape, including creating a downturn in mergers and acquisitions. But, as businesses adjusted to the new paradigm, companies began to see just how important intellectual property was to their bottom lines. And Don Fancher, principal in the Deloitte Forensic practice of Deloitte Financial Services, LLP, sees IP as playing an increasingly important role in M&A transactions

“As technology gets more advanced and more specialized, it becomes more difficult for companies to do all the research they need to meet the market,” Fancher says. And, as companies move into new markets, they find it wise to invest in a wide array of technologies. These companies are, more then ever, looking externally and seeing IP as a way either to block a competitor or to allow themselves to be a disruptor in the market.

As companies consider mergers or acquisitions that involve intellectual property, they must assess the value of the IP. The company must make assessments on how the IP will fit into their business strategies. Today, it’s less a matter of needing IP to save money or reduce costs, but more often it’s a way to advance market share in a particular direction. So companies must look for an organization that meets the business needs and start valuations. One point to consider is how much a particular technology would take to develop in-house, or how long it would take. “Companies will measure the level of profitability against hurdle rates and investment. It’s not that different form buying a warehouse or distribution center in that way,” noted Fancher. 

The most important factor, Fancher says, is to keep a close connection between business and IP, especially at the top. “The only way it works is if it is sponsored or led by the C-Suite, superseding individual or group priorities,” he emphasizes. In research-oriented companies, R&D leads and controls IP, working with legal when needed. “But if research or legal or marketing leads IP strategy, you are not getting a holistic view of where IP is going or how it relates to strategy,” he says, noting that the C-Suite must also be careful not to hamstring research too much for fear of missing an “Aha!” moment.

 

For more on intellectual property, check out the following:

Spider-Man, Spider-Man, fighting IP litigation like a spider can

Several tech companies urge careful review in public of details in proposed TPP trade deal

Comcast/Time Warner merger now facing scrutiny from states

Patent troll bill moves through Wisconsin

 

Senior Editor

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Rich Steeves

Richard P. Steeves is Senior Editor of InsideCounsel magazine, where he covers the intellectual property and compliance beats. Rich earned a B.A. in English Literature...

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