Mergers And Acquisitions Due Diligence: Seven Critical Steps You Cant Afford To Overlook - I

The topic of Mergers and Acquisitions (M&A) has become much more important to many companies today than it has been in the past

. The economy appears to be on the mend, and companies are scrambling to find ways to expand quickly. Companies are also being forced to cope with rising litigation risk because the business environment is simply more litigious.

It is not unusual for companies to hold back the acquisition offer until an IP audit is performed and cleared. The litigious nature of business today has even created a relatively new product in the insurance industry. If the company being acquired wants the acquisition offer immediately rather than waiting for clearance, they must purchase an insurance policy that shifts the risk from the acquiring company to the issuing company.

This increased litigiousness has also produced a more rigorous due diligence requirement that involves more focus on the way intelligence is gathered and the processes associated with it. The process is much more regimented than it once was, requiring companies to ask the following questions:

What IP does the acquisition candidate own?

The acquisition candidate should provide an IP portfolio catalog. The individual patents and trademarks should then be examined to determine any potential liability, which can manifest itself in several ways.

First, you want to make sure you acquire all the Intellectual property patents when the contract is consummated. You cant rely entirely on the portfolio list provided by the target acquisition. The proper due diligence requires you to verify that the list is complete. The only way to confirm a complete list is to use an analytics tool like Innography. This begs the question, though, why is a complete list important?

There are really two reasons to be concerned about the protection of intellectual property in the acquisition: exclusivity and exposure. Exclusivity is important because it has a direct bearing on the value of the acquisition. IP is essentially a technology monopoly, and the degree to which it is exclusive determines, in part, its value. Here are just a few things that you want to examine before the portfolio transfer is executed:

oInternational patent family members

oContinuations in part

oPatents without current assignee data

oRecently acquired patents that might

have been overlooked

oPatent divestitures that are undocumented

What geographical markets are covered in their portfolio?

Its no secret that company valuations are complex, but a variable you cant overlook when evaluating an acquisition target is the geographical composition of their IP portfolio. Geographical concentrations suggest future revenue sources. When technologies and processes are patented in a specific jurisdiction, products associated with that IP can be sold exclusively by you in that jurisdiction. In other words if you decide to sell in that jurisdiction you will have 100% of the market.

by: Tyron Stading

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