Michael D. Moberly June 27, 2012
Context…today, 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability directly evolve from intangible assets usually, intellectual property. One must, and I might add, correctly conclude then, that proportionately, similarly increasing percentages of (global) business transactions will involve either the buying, selling, or trading of intangible assets and IP.
As intangible assets become more recognizable and play more integral roles in business transactions, their value and exposure (vulnerability) elevates. So now, it’s not merely prudent, but rapidly being quite correctly characterized as a fiduciary responsibility for transaction management teams to:
- include intangible asset specialists and strategists skilled in the art and science of conducting due diligence on intangible assets that are increasingl in play and/or part of a deal.
- be alert to an ever increasing and sophisticated array of risks and threats when materialized, can rapidly undermine and/or erode asset value, competitive advantages, and projected synergies and efficiencies, or, worst case, cause certain intangible asset values ‘to go to zero’.
Perhaps it’s worth repeating, it’s no longer merely prudent, rather, it’s essential, if not a fiduciary responsibility for transaction initiators to recognize that in most, if not all deals, intangible assets, e.g., IP, competitive advantages, proprietary information and know how in the form of intellectual, structural, and relationship capital are critical to transaction value and achieving a positive and sustainable outcome. It is in this context then, that I urge transaction management teams to include, at the outset, a high degree of specialization and expertise, particularly with respect to intangible assets, i.e., professionals who…
- are additionally skilled in identifying, unraveling, and safeguarding those intangible assets identified as being integral to transaction success.
- can identify transaction risks, which, if materialized, can stifle a deals’ momentum and/or undermine important assets’ projected value, competitive advantages, and synergies.
- can articulate relevant-favorable (off-setting, mitigating) modifications to the terms of a transaction when risks are revealed that jeopardize asset value projected synergies, expected efficiencies, etc.
- can readily put in place effective, yet unobtrusive measures that compliment re-negotiated transaction-contractual codicils to retain control, use, ownership, and monitor value and materiality of key assets in both pre and post transaction contexts.
One could make an effective argument then that intangible asset specialists and strategists today are comparable to industry sector (Wall Street) analysts who assess and monitor relevant-key variables, e.g., trends, events, cycles, and risks to intellectual and structural capital, innovation pipelines, and the full range of intangibles relative to their near – long term stability, sustainability, fragility, and volatility.
The premise here, of course, is that intangible asset specialists and strategists should be early and consistent invitee’s to the ‘transaction management and decision table’. And, once ‘at the table’, their assessments and recommendations should be given due attention relative their contributions to facilitating more secure, stable, and profitable transactions as they were initially envisioned.
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