What is it worth?
We often get the question - What is the value of Intellectual Property (IP)? Gerbsman Partners consistent answer is that "the Market" will determine the value of IP. As such, there are typically 4 groups that should have an interest; Customers, Competitors, Strategic’s and VC/Equity groups for their portfolio companies. Gerbsman Partners, with its proven "Architecture of Maximizing Value- through is proprietary Date Certain M&A Process" of assets and Intellectual Property, has assisted 75 technology, life science, medical device, and solar companies maximize value.
A critical factor, besides the quality and relevance of the IP and the team, is how much resources and time the company can spend on the "Date Certain M&A Process". The availability, forecasting, and control of CASH is the ultimate resource needed to develop and execute a plan of action for maximizing value.
Gerbsman Partners proven and proprietary "Date Certain M&A Process", includes the packaging, promoting, identifying, following up and closing of qualified prospects. One of the challenges that Gerbsman Partners has met successfully, is the depth of its IP team’s ability to provide an understanding of the IP to qualified prospects and with the company, its knowledge base of the market, evaluating current client engagements, reviewing the company’s strategic plan and potential opportunities, as well as proprietary patents and technology.
What does Gerbsman Partners need to maximize value of the IP?
The most important aspect of maximizing value is the availability of the key development and marketing team. These individuals have the domain knowledge and expertise needed to maximize value. Gerbsman Partners can categorically state that the value/increased value of the IP is directly related to the quality and availability of the key team.
In order to prove to the buyer that there actually is solid IP available we need/require (software example):
- Development process documentation (project plans, deliverables, version/release control, change procedures, etc)
- Requirements and Specifications
- Process, Object, and Data models
- Architecture and API descriptions
- Use of third party platforms/components/tools
- Source code - platform
- Source code - client specific
- Test environment (including test scripts and data) and Test reports
- Bug/change reports
- Performance tests & results
- Future enhancement plans/specifications
The IP will have a higher value if it has been proven to work both in terms of sales and implementation. Documentation from sales and deployment, together with case studies and meeting with current clients are useful. To start with we need (software example):
- Customer list. For each customer: name, contact information, reference person, number of employees, contract size, deliverables, liabilities, environment, integration efforts, functionality deployed, and the status of the project in terms of ongoing efforts.
- Documentation provided to the client.
- Education support material (Development process, Implementation guidelines, API's, etc for internal development/enhancement/maintenance).
- List of systems you have integrated with so far.
Ownership and Protection
One of the key issues in maximizing value of the IP, is the ability to give clean title. In some circumstances, the IP is sold "as is, where is - with no representations or warranties whatsoever" other then that of a clean title. In order to do so, contingent liabilities such as real estate executory contracts, equipment lease agreements, senior and junior debt and other creditor and accounts payable issues must be resolved/restructured. As a starting point, we need the following in order to evaluate the ability to finalize the M&A process:
- Any executory contracts limiting the ability to close a transaction?
- Do current client contracts provide rights to the clients that limits the use of the intellectual property in any way?
- Has the company used intellectual property owned by someone else? If so, on what terms?
- Results of patent searches?
- Anything in the company's solution that is currently protected?
- If no, can something be protected? Does the company have any patent applications prepared?
- If yes, is it defendable and can something else be protected as well?
- Current ownership structure? Any earlier participants (co founders, earlier investors, developers, etc) that can claim ownership?