The process of business mergers and acquisitions can be time-consuming and complex, and sometimes the move needs to happen so quickly that key items are ignored, given a short shrift or are just forgotten altogether. This is often the situation with intellectual property, which can be an extremely valuable aspect of a company’s operations.
Why is intellectual property so often overlooked during the business valuations that occur as part of mergers and acquisitions? First, the focus is often on the parts of the business that actually make money. Another issue is that exactly what constitutes intellectual property is not always clear to everyone involved.
Most people, when they consider intellectual property, probably think of its definition in the arts, in which a copyright protects the products of artistic creation. However, in business, trademarks, patents, trade secrets, industrial designs, marketing plans and materials in print and online can all be considered intellectual property.
Intellectual property holds real value
The problem with failing to account for intellectual property in business valuation is that this property, while often not technically a moneymaker on its own, can still make a huge difference in a company’s revenues. Consider a marketing plan, for example — it doesn’t generate revenue by itself, but it provides definite value to the business. During mergers and acquisitions, when a full accounting of all of the companies’ assets is necessary, it is important that intellectual property is included in the process.
Because intellectual property holds such value for a company, a well-respected valuation analyst should examine it. In determining the value of intellectual property, several factors should be taken into consideration. Among these are the uniqueness of the asset and the amount of money the asset has generated in the past, along with what it might be expected to generate in the future. Not surprisingly, determining the financial benefits related to a trademark or a simple business website can be extremely complex and demands the involvement of an experienced valuation analyst or a skilled business attorney.
When your company is preparing for a merger or acquisition, no matter which side of the deal you’re on, it’s critical to ensure that all intellectual property is accurately and totally accounted for. To make sure this aspect of the process goes smoothly and nothing gets left out, it is a wise idea to seek counsel from an experienced intellectual property lawyer. This is the best choice for your company, as well as the most surefire way to make sure your intellectual property is treated with the care and attention it deserves.
BoltNagi is a widely respected and established corporate and business law firm serving clients throughout the U.S. Virgin Islands.