Archive for April, 2015
Michael D. Moberly April 28, 2015 ‘A blog where attention span really matters’!
With a significant level of confidence, most conventional, snap-shots-in-time, and subjective prognostications gleaned from IA (intangible asset) valuations and/or audits, do not provide prospective buyers, sellers, investors, or M&A management teams with the necessary insight reflective of today’s business economic realities and due diligence obligations.
Considering it is an indisputable economic fact that 80+% of most company’s value, sources of revenue, and by extension, favorable outcomes to business transactions are premised on a party’s ability to sustain control, use, ownership, and monitor (IA’s) value, materiality, and risk, each of which will inevitably be in play to impact a transaction’s outcome.
Business transaction valuation and due diligence should provide prospective buyers, sellers, investors, and M&A management teams with objective invest-don’t invest, buy-don’t buy clarity, e.g.
- IA sustainability, attractivity, demand , and receptivity to convergence.
- the frequency – intensity which the IA’s in play are targeted by – vulnerable to predatorial data mining, business-competitor intelligence, and economic espionage operations.
- assets’ proprietary status, competitive advantage components, or trade secrecy status.
The business valuation community argues that expanding the scope of IA valuations and due diligence to include these components exceeds the canons, doctrine, and statutes to which accounting, financial services, and legal are variously obligated to follow, i.e., state and federal accounting rules and regulations which stipulate what, which, and how IA’s are to be valued and reported on balance sheets and financial statements.
In fairness, state and federal accounting rules and regulations stipulate methodologies for calculating the value of IA’s. In many instances, I sense such valuations are unnecessarily narrow and fall short, one way is that IA’s are differentiated largely on whether they have been externally acquired or internally developed, and then consolidated under the single category of goodwill.
I suspect continued adherence to such conventional IA reporting and accounting rules will serve to further stifle – suppress management team’s interest in – motivation to profitably and competitively engage their organization’s IA’s beyond the narrow time-bound confines of goodwill, and
- explore the relevance of IA’s contributory value and functionality cycles, and IA’s
- IA’s vulnerability to various risks which, once materialized, will adversely affect – undermine asset’s value, functionality, and competitive advantage life cycle.
Admittedly, as an independent intangible asset strategist and risk specialist I do not feel bound by the exacting and conventional state and federal accounting rules and regulations. This represents a creative sovereignty that permits me to engage in respectful outside-the-box strategizing and asset risk management on behalf of IA clients.
Michael D. Moberly April 27, 2015 ‘A blog where attention span really matters’!
Experience suggests that substantial percentage of IA (intangible asset) valuations conducted for organizations, irrespective of context, do not provide sufficient managerial (buyer, seller, investor) insight, if it does not…
- fully capture (factor) an organization’s foundational IA’s, i.e., intellectual, structural, relationship, and creativity capital.
Given the increasingly significant role IA’s play in organizations, i.e., 80+% of most company’s value and sources of revenue, etc., lie in – emerge directly from IA’s, I encourage valuations unravel – distinguish organization’s IA’s relative to their individual or collaborative ‘contributory value’, e.g., to a particular project or initiative, a company’s overall mission or its competitive advantages, etc.
With due respect to the valuation community, absent determination and inclusion of assets’ contributory value, conventional (IA) valuations are insufficiently descriptive and too subjective insofar as…
- inspiring management teams’ to seek-achieve operational familiarity with IA’s.
- providing insights to IA’s functionality.
- incorporating IA’s in an organization’s strategic planning.
I’m respectfully confident readers will correct me should I be wrong on this, but there are some five, perhaps more, methodologies for valuing IA’s. Each methodology is variously designed to be context – purpose specific. The product of conventional valuation methodologies frequently deliver only ‘range estimates’ of asset value absent the specificity advocated here.
For horizonal strategists, being provided with a subjective or range of IA valuation data, standing alone, seldom provides sufficient insight to make the most effective business decision. Ultimately, such incomplete IA portraits of organization value leave decision makers holding unnecessary risk and uncertainty with no clear paths for (risk) mitigation.
Michael D. Moberly April 24, 2015 ‘A blog where attention span is important’!
Let’s digress. For IP, the government or PTO (U.S. Patent and Trademark Office) issues a certificate to the holder-owner that says ‘this is your patent, trademark, or copyright’. Deservedly and proudly those certificates are frequently displayed in areas which the recipient deems sufficiently prominent as a testament to their creative diligence.
Perhaps most importantly however, the certificate itself positions the holder to utter an affirmative response to the proverbially incessant question ‘what’s your IP position’, implying IP is the preeminent requisite. In this admittedly narrow context, the tangible – physical features of the PTO certificate serves as a creative’s conforming starting point to receive a modicum of affirmation from the likes of television’s ‘shark tank’ panelists.
A notably remarkable aspect to the patent seeking – securing phenomena is that ‘creatives’, by their nature, are seldom considered to be conformists. In fact, a quite strong argument could be made that creatives’ seemingly innate penchant for non-conformity serves as very strong underliers to sustaining their personal diligence toward a specific (strategic) end.
But yet, for the creatives’ who are diligently engaged in an arena in which their work product falls into a potentially patentable field, routinely defer to presumed experienced practitioners of the ‘shark tank’ ilk who unabashedly premise – link their flirtatious counsel to whether one’s work product has received a patent. Today such unrequited deference warrants discussion, don’t you think?