Client: A private equity firm advising a Fortune 50 company on a potential purchase of a computer business
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Need
Address issues with existing licenses and patents to help the buyer make a go/no go decision
Pressing Questions
• What IP goes with the sale, and what is the value? What licenses can be assigned, and on what terms?
• Will there be ongoing licensing fees to pay or fees due that the buyer needs to consider?
• How exposed will the new computer business be once it is no longer under the Fortune 50’s umbrella?
Approach
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Read through all licensing agreements to determine which could be assigned to the buyer and under what terms
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Thoroughly reviewed and dissected all patents to see which applied to the sale of the computer business
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Determined what royalties were currently being received and/or paid and what the go-forward royalty scenario would be
Major Discoveries
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Illuminated that anticipated and highly valued IP would not be part of the sale
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Determined the buyer would have critical exposure based on the current licensing agreements.
Result
The buyer elected not to move forward with the purchase because the exposure was too great and closed a similar deal with a competing technology firm.
Learning
Get advice about the value and ramifications of intellectual property patents and license agreements prior to purchase or sale. While most M&A and financial firms don’t include this evaluation, it can be a critical—and even deciding—factor on whether a transaction moves forward.
