IP Due Diligence IPmetrics 2010

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The asset class of intangibles, including intellectual property (IP) makes specific demands on the due diligence process for transactions and strategic decision making.

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IP Due Diligence IPmetrics 2010

  1. 1. IP DUE DILIGENCE KEY ISSUES FOR M&AKEY ISSUES FOR M&A FROM A VALUE PERSPECTIVEFROM A VALUE PERSPECTIVE FERNANDO TORRES, MSCFERNANDO TORRES, MSC IPMETRICSIPMETRICS®®
  2. 2. TOPICS  Public IP identification and value  Quality, hierarchy and value elements  The valuation process  IP value enhancement
  3. 3. FIRST STEPS: IDENTIFY THE INTANGIBLES  Internally generated intangible assets or intellectual property are expensed or recorded at historical cost  Acquired intangibles and IP reported as allocated at purchase date  Intellectual property must be stratified into core and peripheral categories  Not all intangible assets are intellectual property  Not all intellectual property may be at the core  Peripheral portfolios may be monetized
  4. 4. INTELLECTUAL PROPERTY
  5. 5. INTANGIBLE ASSETS
  6. 6. IDENTIFY IP PORTFOLIOS FOR EXTENSIONS  Vertical and horizontal  Out-licensing  Spin-off  Analyze quality of trademark IP  Relevance to current/future business  Relative strength analysis  Potential infringement analysis
  7. 7. ANALYZE IA/IP PORTFOLIO QUALITY  Forward/backward references  Breadth of claims set  Challenge / infringement record  Trade secrets procedures and safeguards  Knowledge bases  Below-market contracts
  8. 8. STANDARDS OF VALUE  Fair market value – FMV –  The price at which property would change hands between a willing buyer and seller, when neither party is under compulsion to transact and both parties have reasonable knowledge of relevant facts  IRS purposes, hypothetical transaction  Fair value – FASB IFRS –  The amount at which an asset could be bought or sold in a current transaction between willing parties, other than in a forced or liquidation sale  GAAP, specific synergies
  9. 9. VALUE OF IP IN USE  Value to (hypothetical) licensee  Value to (potential) licensor  Anticipated growth / decline  Reserve value  Blocking value  Monopoly value  Out-licensing  Core IP vis-à-vis Peripheral IP  IP holding company
  10. 10. CONTACT US

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