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IP DUE DILIGENCE
KEY ISSUES FOR M&AKEY ISSUES FOR M&AFROM A VALUE PERSPECTIVEFROM A VALUE PERSPECTIVE
FERNANDO TORRES, MSCFERNANDO TORRES, MSC
IPMETRICSIPMETRICS®®
TOPICS
Public IP identification and value
Quality, hierarchy and value elements
The valuation process
IP value enhancement
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
INTELLECTUAL PROPERTY
INTANGIBLE ASSETS
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
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
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
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
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