Archive for 'Intangible asset assessments/audits.'

Cost Of Employee Misunderstanding…$37b in Intangible Assets

July 9th, 2017. Published under Communicating Risk, Intangible asset assessments/audits., Intangible asset focused company culture.. No Comments.

Michael D. Moberly July 9. 2017 m.moberly@kpstrat.com ‘A business intangible asset blog where attention span really matters’!

I am reminded of a ‘buy offer’ several years ago when Steve Balmer (Microsoft) expressed interest in purchasing Yahoo! for a reported $43 billion. And, according to multiple respected estimates, perhaps as much as $38 billion of the ($43b) purchase price, had the transaction been executed at the time, would be comprised of Yahoo’s IA’s (intangible assets), primarily in various forms of intellectual, structural, and relationship capital.

The $37b figure should come as no surprise to those even minimally familiar with the irreversible trend (economic fact) that companies are far less reliant on tangible-physical assets and instead, transitioning, at a rapid pace to IA intensity and dependency. The reason lies in the unchallengeable economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for competitiveness, growth, sustainability, and profitability today lie in – evolve directly from IA’s, particularly intellectual, relationship, structural, and competitive capital.

What I am suggesting is this, should the $38b figure noted above be reasonably correct, which I believe it is, it alone should influence c-suites and management teams to review a 2008 IDC ‘white paper’ study (www.congisco.com/downloads/whitepaper/uk_exec_summary.pdf ) commissioned by Cognisco which self-describes as ‘the world’s largest intelligent employee assessment specialist’. The studies’ findings provide evidence that for UK and US employers considered in the study, are losing an estimated $37 billion annually from their EBITDA, due primarily to actions or errors of omission by employees who, for various reasons misunderstand, have misinterpreted, or, were misinformed about company processes, practices, policies, or their job function.

The report, titled ‘Counting the Cost of Employee Misunderstanding’ revealed the scale of the impact, i.e., $37 billion annually, is attributable to employee misunderstanding, which the report defines as… actions taken by employees who have misunderstood or misinterpreted (or were misinformed about or lack confidence in their understanding) of company policies, business processes, job function or a combination of the three.

The study indicates many businesses are generally aware of the costs attributed to (employee) misunderstanding, but, approximately one in three self-report they had taken actions to close the ‘misunderstanding gap’. From this, it’s certainly not a stretch then for company security directors and managers to assume businesses, are quite literally inviting risk through sustained employee misunderstanding.

Particularly noteworthy in the studies’ findings is that approximately two thirds of the ($37b) cost of employee misunderstanding by the 400 reporting companies in the 12 months encompassing the study were attributed to…

• loss of business due to unplanned downtime (32%).
• poor procurement practice (17%).
• costs – settlements incurred from regulatory penalties and tax or
revenue penalties (16%).
• placing a business at risk of injuries to employees and/or the
public, and
• loss of sales and reduced customer satisfaction.

The findings also highlighted that the real cost of employee misunderstanding may be even higher, when costs such as impact on brand, reputation and customer satisfaction (also intangible assets) are accounted for.

Mary Clarke, former CEO at Cognisco, notes rather obviously, if an employee misunderstands or misinterprets actions there will be repercussions from loss of business to impaired brand image. But what is often not measured, is the employee’s confidence to take the appropriate actions which can also have a significant impact.”

Intangible Assets and Speed of Innovation, They Really Matter!

June 27th, 2017. Published under 'Safeguarding Intangible Assets', Intangible asset assessments/audits., Intangible asset training for management teams.. No Comments.

Michael D. Moberly June 27, 2017 m.moberly@kpstrat.com ‘A business intangible asset blog where attention span really matters’!

If you are a founder and/or member of the management teams of a RBSU (research based startup), would it matter to you to know that achieving operational familiarity with the relevant intangible assets would favorably affect the speed (pace, momentum, etc.) which your innovation would be launched? (RBSU’s are widely defined as new business start-ups which develop and market new products or services based upon a proprietary technology or skill set.)

It hardly needs stating that the timing attached to product-service launches is important on many levels. one of which, it puts a new venture, on ‘the public stage’ and subject to all-of-the like and dislike variables which inevitably follow.

When stake holder, prospective user, and investor reaction is collectively favorable, launches can put RBSU’s innovation a few steps closer to generating revenue, says Ans Heirman and Bart Clarysse (formerly of Ghent University) in their fine paper ‘Do Intangible Assets at Start-Up Matter for Innovation Speed?’ Heirman and Clarysse’ thesis is that pre-founding R&D efforts in conjunction with the underlying intangible assets, in this instance, team tenure, experience level of founders, and collaborations with third parties, etc., are important contributors to innovation speed. This model, demonstrating the influence of intangible assets was tested using an event-history approach on a dataset of 99 RBSU’s.

To be sure, today, there is much more known about new product development processes in new ventures and which intangible (asset) factors influence the time it takes to launch a RBSU’s first product in the market. For new ventures, time to market is a crucial factor Heirman and Clarysse suggest, and I agree, for four, rather obvious reasons…

1. to gain early cash-flow that leads to greater financial – operational
independence.
2. to gain external visibility and legitimacy (of the product) as
quickly as possible.
3. to try to gain market share as early as prudently possible.
4. to increase the likelihood of RBSU sustainability (survivability).

Relevant literature, according to the work of Brown & Eisenhardt on matters related to new product launches, describes the dominant factors to success lie in various and specific intangible assets, i.e.,
• team tenure and routines (intellectual capital)
• experienced and cross-functional teams. (structural capital)
• alliances or collaborations with other organizations. (relationship
capital)

The speed which an RBSU’s innovation arrives at its launch stage is important for other reasons as well, e.g., attracting successive rounds of investment. Another increasingly crucial factor that affects the speed which RBSU’s innovation is positioned for launch is early recognition to safeguard any-all proprietary, contributory, and enabling intangible assets which in most instances have been (are) already and thoroughly embedded in the innovation itself.

To study how intangible assets influence the time it takes to develop a first product that is ready for launch Heirman and Clarysse used an ‘event-history analysis’ which takes-into-account both the occurrence and timing of specific events contributing to new product launch, while estimating the effects, i.e., contributory – enabling – variable role of intangible assets.
I have witnessed numerous RBSU founding management teams prematurely and probably imprudently, become overly focused on aspirations to seek the issuance of a patent for their innovation. What I believe is rather naïve, some RBSU management members assume ‘the patent route’, standing alone, will serve as sufficient safeguards for the intangible assets underlying their innovation. This aspiration can be influenced by investors preference, often framed as a requisite to favorable investment consideration, i.e., an innovation be issued or have a patent action pending.

What innovators tend to discount, overlook, or have insufficient knowledge, are the valuable (contributing, enabling) intangible assets that routinely serve as the underlying foundation to every innovation. Based solely on my anecdotal assessments from observing numerous venture forums, I routinely estimate that 90+% of the pitching RBSU’s building blocks – foundations for launch, growth, profitability, and sustainability lie in – evolve directly from embedded intangible assets.

Even though Heirman and Clarysse’ paper was published in 2004, it still carries, in my judgment, much relevance insofar as making another persuasive case that precursors – preludes to innovation speed lies in distinguishing, safeguarding, and managing key (contributing, enabling) intangible assets, particularly, the intellectual, relationship, and structural capital.

Heirman and Clarysse also make a very favorable case that other equally important intangible assets, which they refer to as ‘pre-founding R&D efforts’, e.g.,
• innovation team tenure,
• the experience level of the RBSU’s founders and management team
members, and
• third party collaborations, are also important contributors to
innovation speed.

I have found (not rocket science) most entrepreneurs understand that the element of speed of innovation is important for numerous reasons, among them being…
• attracting – acquiring early investment to achieve more (greater)
financial independence,
• achieving broader external visibility and legitimacy for their
innovation as quickly as possible, and
• delineating the innovations’ competitive advantages as early as
possible.

I agree with both Heirman and Clarysse that R&D cycles for innovation can vary widely based on, among other things, the phases of product development and specialized technologies required. Being an intangible asset strategist, risk specialist, and trainer, no surprise here.

Collectively, this confers additional credence on the view that identifying inter-connected clusters of contributory and enabling intangible assets is important insofar as they may re-emerge at some point as enablers to another RBSU innovation. In other words, RBSU management teams should avoid dismissing or neglecting intangibles as if they are a single use asset. Too, it’s perfectly feasible that certain intangibles can be extracted from an already launched innovation to become independent sources of value and revenue.

Intangible Asset Due Diligence Transaction Pre-Post Monitoring

August 1st, 2016. Published under Due Diligence and Risk Assessments, Intangible asset assessments/audits., Sustainability of intangible assets.. No Comments.

Michael D. Moberly August 1, 2016 ‘A blog intersecting intangible assets and business!’

Intangible asset specific due diligence is a necessary, but often overlooked component in consummating business transactions, especially pre and post monitoring.

For management teams, c-suites, boards, and stakeholders, it’s important, more so today than perhaps ever before, to recognize that merely because a deal, transaction, or M&A has been proposed, appears promising and has progressed to its relevant due diligence stage, does not constitute assurance any of the projected-anticipated value, synergies, efficiencies, scalability, and competitive advantages will actually materialize or be sustainable.

The probability that any calculated – anticipated projections related to a business transaction outcome will materialize to benefit its initiator, preferably sooner than later, is increasingly dependent on the sophistication of due diligence management teams to recognize the economic fact that today, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, future wealth creation, and sustainability reside in – evolve directly from IA’s (intangible assets). To increase the probability that initial projections (to a transaction’s outcome) will materialize as intended, the scope of transaction due diligence must include identifying, unraveling, assessing asset fragility and transferability, mitigating risks, and otherwise safeguarding-preserving the key – contributory IA’s value and competitive advantages.

The key forms which the dominant, most valuable, and competitive advantage driving IA’s exist are intellectual, structural, relationship, and competitive capital and reputation/brand. In most instances, it is these IA’s and their scalability which likely drew attention around which the initial and underlying rationale for imagining and undertaking a particular transaction was framed

True, in many instances, valuable – competitive advantage driving IA’s can be variously fragile and vulnerable to various risks, including value – competitive advantage fluctuation, misappropriation and infringement. For good reason then, the ability to monitor control, use, ownership, and value of key IA’s to the transaction, in both pre and post contexts, will sustainable and lucrative projections be realized. The rationale; more companies today engage in domestic – international trade and business transactions as a matter of routine. Too, for a significant percentage of those transactions, the negotiations are aggressive, competitive, predatorial, and come with winner-take-all outcomes. Under these circumstances, dismissing and/or relegating these business – transaction realities and fiduciary responsibilities about IA’s to the un-initiated, unaware, or unfamiliar when IA’s will inevitably be dynamic contributors to lucrative outcomes of transactions.

In that regard, I have had the privilege, over the years, to engage countless business decision makers and strategists across industry sectors. In private conversation, few, if any of these executive dispute my characterizations and advocacy of IA’s. Assuming these conversations are representative, it would seem prudent then that IA’s would be applied to all relevant aspects of a business transaction process, especially pre-post (transaction) due diligence where sustaining – monitoring control, use, and ownership of IA’s contributory role, value, and competitive advantages are paramount to the outcome.

Transaction Due Diligence and Intangible Assets

July 26th, 2016. Published under Due Diligence and Risk Assessments, Intangible asset assessments/audits.. No Comments.

Michael D. Moberly July 26, 2016 ‘A business blog where attention span really matters’!

It is an undisputable economic fact – business reality that today, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from IA’s (intangible assets)!

It’s prudent to assume then, for every business transaction, initiative, or operation a company and its management team elect to undertake – engage, there will always be IA’s in play. This makes it’s essential for parties to recognize, when contemplating, structuring, and executing a transaction, particularly the due diligence component, that sustaining control, use, and ownership of relevant IA’s, will play increasingly significant roles insofar as valuation, measuring asset performance and outcomes, and defining an exit strategy.

Too, respecting the ease which valuable-competitive IA’s (particularly intellectual, structural, and relationship capital) can be misappropriated, undermined, entangled, lost, or merely walk out the front door, the impulse to consummate a deal in a gratuitously hurried fashion, absent pre and post due diligence focused specifically on IA’s, it becomes probable that some manner-form of IA economic – competitive advantage hemorrhaging will occur. In other words, in today’s aggressive, interwoven, predatorial, and winner-take-all (global) business climate, the IA’s a party believes they are buying – acquiring ownership, may lose various percentages of their contributory value.

Having been actively engaged in safeguarding and mitigating risk to IA’s for many years, my counsel on the issue of IA (specific) due diligence is straightforward. Decision makers responsible for deal structuring have fiduciary responsibilities that include sustaining control, use, ownership, reputation, and monitoring value and materiality of the about-to-be-purchased (acquired) IA’s. The most effective way to mitigate risk to those assets is an effective pre and post due diligence, specific to the relevant IA’s. The key to this due diligence is knowing what IA’s are, how they evolve-develop within a company, and their contributory role and value.

For maximum benefit, the due diligence is best commenced at the point in which the deal/transaction is being contemplated so the locus of the relevant IA’s can be determined and due diligence planned accordingly. Again, it’s worth noting, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from IA’s!

IA hemorrhaging (in deals and transactions) is frequently facilitated when two frequently held attitudes of decision makers converge, i.e.,

• unnecessarily high or unjustified sense of urgency attached to deal execution. (Urgency and speed often
mutate to become a dominant driver of a transaction which in turn can constrict – impede a thorough due
diligence, especially with respect to unraveling the origins, stability, sustainability, value,
and ‘mergability – transferability’ of the IA’s in play.)
• assumption that deals-transactions can be consummated and revenue streams commence before relevant IA’s fall
prey to depreciation or loss.

Mitigating asset vulnerability and probability to value – competitive advantage – reputation hemorrhaging, well in advance of the ink drying on a transaction agreement, is an essential contributor to achieving the desired (successful, profitable, sustainable) outcome.

Assessing Intangible Assets

May 26th, 2016. Published under Due Diligence and Risk Assessments, Fiduciary Responsibility, Intangible asset assessments/audits.. No Comments.

Michael D. Moberly May 26, 2016 ‘A blog where attention span really matters’!

What Are Intangible Assets…
Company and institutional value has shifted from collections of physical (tangible) assets to synergistic assemblages of non-physical IA’s (intangible assets) rooted in – evolving from intellectual, structural, relationship, and competitive/entrepreneurial capital.

However, unlike conventional IP (intellectual property), i.e., patents, trademarks and copyrights, there is no certificate issued by the government that says ‘these are your IA’s and competitive advantages’. Instead, the responsibility for identifying, assessing, safeguarding and otherwise preserving the value of those assets is a fiduciary responsibility for each company – organization and its management team.

Margaret Blair and Steven Wallman, previously associated with the Brookings Institution’s ‘intangibles project’, serving as that project’s principle investigators, along with Jonathan Low, describe IA’s as…“non-physical factors of production that contribute to or are used in producing goods or services, or as factors expected to generate future benefits for the individuals or firms controlling the assets”.

I see, with increasing consistency IA’s are the product of uncoordinated, unplanned, variously collaborative, and occasionally serendipitous actions of knowledge relevant individuals, and not necessarily the result of a decision arising from a dedicated capital allocation. Specific examples of IA’s are described with considerable specificity in numerous posts at my ‘Business IP and Intangible Asset Blog’ and distinguished in some 14+ categories.

The relevance of IA assessments…
An IA assessment is a methodical, insightful, and ultimately prescriptive tool for identifying, unraveling, and distinguishing the contributory – competitive value of key – strategic IA’s that underlie (serve as the foundation to) a company’s stability, profitability, and sustainability, and reputation.

To be sure, IA-specific assessments remain relatively new. They have largely born out of necessity, that is, the economic fact – global business reality that 80+% of most company’s value, sources of revenue, and sustainability lie in – evolve directly form IA’s, no longer tangible-physical assets. As such, a new, non-conventional approach (method, model) to identify and assess those assets was needed; distinguishable from conventional IP valuations and inventories. To accommodate IA’s, this approach must, of course, be sufficiently flexible to (reveal) identify IA’s in a variety of inter-linked and global circumstances and contexts in which they’re being used and the formats in which they exist.

Prioritizing Public Radio’s Intangible Assets

January 28th, 2016. Published under Intangible asset assessments/audits., Intangible asset valuation., Sustainability of intangible assets.. No Comments.

Michael D. Moberly   January 28, 2016   ‘A business blog where attention span really matters’!

National Public Radio (NPR) is a privately and publicly funded non-profit membership media organization that serves as a national syndicator to a network of 900 public radio stations in the United States.

NPR produces and distributes news and various cultural programming, however, individual public radio stations are not required to broadcast all NPR programs, instead most broadcast a mixture of NPR programs and content from other providers, i.e., American Public Media, Public Radio International, and Public Radio Exchange, as well as locally (station specific) programs.

There numerous qualities My experience in identifying and prioritizing most organization’s IA’s (intangible assets) commences with assessing the assets’ strategic relevance to mission, i.e.,

  • the sustainability – longevity of the asset’s contribution to an organization’s overall value and/or to a particular project or initiative.
  • their consistency insofar as sources of revenue and competitiveness, and
  • their defensibility.

There is an important caveat to this process however, at least through my lens. That is to ensure IA prioritization is not portrayed in a subjective (high, medium, low) continuum context or range estimates, ala Antique Road Show. Instead, asset prioritization should include clear and objective demonstration of their collective, collaborative, competitive, and/or individual contributory role(s) and value.

IA’s, of course, materialize in various ways. For example, relationship capital (an IA) that a public radio station and its staff forge with their communities of listener’s and stakeholders, holds substantial value and frequently triggers new initiatives, projects, and/or programming which in turn deliver multi-layered competitive advantages, i.e., attractive platforms for articulating – communicating issues of the day to all corners of a station’s community of listeners and stakeholders. As it is for any journalistic – news gathering – reporting enterprise, relationship capital is an essential, highly prized, and very valuable IA which embodies, in this instance, a public radio station’s brand.

I am confident public radio leadership appreciate – recognize (station) value, competitiveness, and impact to their respective communities of listeners. These are frequently attributable to prudent ‘envelope pushing’ initiatives, be it through exceptional personnel, new programming, or schedule modifications integrated-enhanced through community outreach, social media, podcasts, an informative website, and a receptively engaging staff. Each serve public radio as legitimate and effective leverage points to…

  • attract capable and creative-innovative intellectual capital (staff).
  • operate an organization with an appealing-gratifying work culture and ethic.
  • deliver substantive content about issues of the day to its communities of listeners, readers, contributors, and sponsors, and
  • strengthen, expand, and ‘bank’ relationship capital.

It is indeed indisputable economic fact that IA’s play increasingly significant roles in organizations, ala 80+% of their value and sources of revenue, etc., lie in – emerge directly from IA’s. So, again, I encourage IA prioritization unravel IA’s relative to their individual and/or collaborative and ‘contributory role-value’, e.g., to a particular project or initiative, a station’s mission and its competitive advantages.

Mr. Moberly is an intangible asset strategist and risk specialist and author of ‘Safeguarding Intangible Assets’ published by Elsevier in 2014, m.moberly@kpstrat.com View Mr. Moberly’s videos on YouTube at ‘safeguarding intangible assets’ or his CNN and CNBC videos at his webpage http://kpstrat.com

IA’s, Beyond Conventional Financial Statements and Balance Sheets

January 27th, 2016. Published under Intangible asset assessments/audits., Intangible asset training for management teams.. No Comments.

Michael D. Moberly   January 27, 2016   ‘A business blog where attention span really matters’!

What I wish to draw reader attention to in this post are conventional financial statements and balance sheets. Both documents are the presumptive ‘Holy Grail’ for identifying – projecting organizational performance, value, growth, and sustainability, etc. But, seldom, if ever, does either (largely regulatory) document, report IA’s (intangible assets) which are internally originated – developed. Instead ‘conventional’ financial statements and balance sheets report only externally acquired IA’s, leaving internally developed IA’s indistinguishably combined – lumped together as mere goodwill.

My experience suggests, in many instances, conventional balance sheets and financial statements  serve to moderate, if not stifle, management team  curiosity – motivation to engage their organization’s IA’s and/or mischaracterize activities related to identifying, unraveling, assessing, and valuing them as pointless undertakings, even though doing so will assuredly develop lucrative – competitive paths of value, revenue, competitiveness, resilience, and sustainability.

As an illustration of this, readers are asked to consider buy-sell transactions for a public radio station, wherein convention would emphasize – draw attention to assets which have more tangible features and outputs, i.e.,

  • numbers – size of a.m. – p.m. listening audience.
  • competing radio stations in the same market space.
  • height of transmission tower and strength of transmitter signal, etc.

Obviously, buy-sell transaction due diligence will reveal some-all of the above and competitively positioned and lucratively exploited, individually – collectively will be desirable assets. However, for this IA strategist these represent tangible-lite types of assets and would be a secondary focus of due diligence I would execute in the same circumstance.

Instead, I would focus more attention on the contributory role – value, competitive position, and measurable impact delivered by a station’s internally originated – developed IA’s relative to its communities of listeners, contributors, donors, and sponsors, along with assessing each IA for its stability, fragility, materiality, and defensibility.

In fairness, conventional financial statements, balance sheets, and asset valuation methodologies were generally not designed (intended) to capture the intangible, i.e., what we factually now know to be the most relevant strategic markers for gauging an organization’s financial health, competitiveness, and performance. To be sure, absent operational familiarity – insight about IA’s contributory roles and value, organizations are significantly less likely to achieve a comprehensive or necessarily accurate portrait of their financial and competitive position.

For these reasons, I encourage readers to recall…it really is an economic fact that 80+% of most organizations value, revenue, and competitiveness, derive from IA’s. If you are a buyer or seller of an IA intensive – dependant organization would it not be prudent to have this (due diligence) knowledge in advance?

Mr. Moberly is an intangible asset strategist and risk specialist and author of ‘Safeguarding Intangible Assets’ published by Elsevier in 2014, m.moberly@kpstrat.com View Mr. Moberly’s videos on YouTube at ‘safeguarding intangible assets’ or his CNN and CNBC videos at his webpage http://kpstrat.com

Transaction Analysis For Intangible Assets!

December 21st, 2012. Published under Business Transactions, Due Diligence and Risk Assessments, Intangible asset assessments/audits.. No Comments.

Michael D. Moberly    December 21, 2012

As stated here on numerous prior occasions, it’s absolutely essential for business decision makers to recognize that in a vast majority of transactions they either initiate or otherwise become engaged, correctly identifying and assessing intangible assets plays an increasingly significant role in achieving a desired, presumably profitable and sustainable, outcome!

The reason of course, is that steadily rising percentages, at least 65+% of most transactions’ value and potential resides exclusively in the effective stewardship, oversight, and management of the intangible assets in play, and, as noted above, critical to achieving a favorable transaction outcome. So, if a transaction management team overlooks or dismisses the intangible assets, it’s tantamount to excluding how and where deal/transaction value is created, revenue is generated, and further strategic planning will be executed.

This makes it all-the-more-important, and, according to many, rising to a level of fiduciary responsibility insofar as transaction management teams’ incorporating intangible assets in their task of strategic oversight. When executed effectively, a transactions’ intangible assets will be collectively addressed in due diligence, inventory, audit, and valuation contexts. On the otherhand, if transaction management teams are deaf to the intangibles underlying most any deal, i.e. by doing neither, it’s quite fair to say it’s time to either change transaction management teams or engage them in relevant training to elevate their operational familiarity with intangible assets, i.e., their ability to identify, unravel, make quantitative-qualitative judgments regarding their status, stability, fragility, contributory value cycle, and overall sustainability.

As readers know, there is an abundance of research that consistently paints a very convincing picture that if and/or when a merger, acquisition, strategic alliance, or other type of transaction ‘goes south’, evidence of impending problems and challenges will surface quite early and will very likely be determined to be rooted in mishandling or disregard for the relevance or contributory value of one or more intangible assets necessary for achieving sustained transaction success.

One technique to mitigate or even remedy the probability that the latter will occur is for decision makers to require (receive) a ‘heads up’ from their transaction management team in the form of what I broadly describe as a ‘before transaction consumation asset impact analysis’. As the phrase implies, this specialized analysis should bring greater (business) clarity, i.e., a more definitive picture of the stability and strategic contributory value of key assets, particularly should certain risk(s), reputation and others, materialize that carry a high probability for adversely affecting one or more of the intangible assets integral to achieving a favorable transaction outcome. The most usable analysis (report) will address

  • the inter-relatedness of intangible assets’ contributory value and associated risks and threats as well as key assets identified as being impaired in some manner, or are found to be already misappropriated, infringed, and/or counterfeited.
  • the probability that particular risks/threats will materialize to adversely affect the projected economics, competitive advantages, and/or synergies of a transaction
  • strategies for mitigating and containing certain risks/threats relative to the resiliency and sustainability of the transactions’ key intangible assets.

The obvious rationale for incorporating a  ‘before transaction consumation asset impact analysis’ is for decision makers to be apprised of circumstances and scenarios that should be revealed which can (may) influence decisions and outcomes.

I am a strong advocate of  ‘before transaction consumation asset impact analysis’ because I believe the three, most challenging intangible assets to sustain and preserve their contributory value (pre/post transaction) are, (a.) intellectual, (b.) relationship, and (c.) structural capital because they are individually and collectively highly mobile and attitudinally based.

Too, a ‘before transaction consumation asset impact analysis’  can reveal other cautionary circumstances/scenarios while retaining the option to proceed with a (a.) plan for risk mitigation, or (b.) re-negotiate a deals’ terms in light of the risk(s) and/or asset impairment(s) that have been identified.

But, the objective remains the same, that is to facilitate a more secure and profitable transaction going forward, not impede it!

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of this post, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance. And, I always welcome your inquiry at 314-440-3593.

Intangible Asset Due Diligence: Selecting The Absolute Best Individual or Firm Is Critical

May 31st, 2012. Published under Due Diligence and Risk Assessments, Intangible asset assessments/audits., Sustainability of intangible assets.. No Comments.

Michael D. Moberly   May 31, 2012

A requisite to conducting superior due diligence for today’s intangible asset dominated and driven businesses, is possessing a depth of experience, knowledge, and investigative skill sets.  These are unique differentiators and essential requisites which collectively serve as starting points for achieving the necessary and insightful (due diligence) product that allows management teams to make informed decisions, i.e., proceed, don’t proceed, buy, don’t buy, or invest, don’t invest!

Respecting the economic fact that 65+% of most company’s and transaction’s value, sources of revenue, and foundations for growth and sustainability evolve directly from intangible assets, selecting not just the right, but, the absolute best individual or firm to conduct due diligence is critical.

For starters, a well-designed and executed due diligence plan must fully examine each of the target’s intangible assets.  That’s because they will inevitably be in play in any transaction. Effective assessment and integration of intangibles serve increasingly significant role to a transaction’s success.  On the other hand, with untold frequency, when intangible assets are not addressed or dismissed during due diligence, transaction failure can be imminent and materialize in a long, slow, and costly fashion, i.e., ‘failure by a thousand cuts’.

To increase the probability that certain projected transaction objectives or outcomes be realized, it’s imperative that the individual or firm contracted to conduct the due diligence can articulate the findings in objective business contexts and certainly not through a one-size-fits-all, snap-shot-in-time guesstimate oriented lens.

Key elements to superior due diligence in today’s intangible asset dominated and driven businesses, starts by possessing the experience, knowledge base, and investigative insight to…

  1. unravel (identify) how, where, and by whom the key (intangible) assets originated.
  2. determine and assess how or whether control, use, and ownership of the assets is or can be sustained.
  3. determine the assets’ contributory value and complimentary role(s) relative to current and future projects and initiatives, i.e., as potential sources of revenue and foundations for (future) growth and sustainability.
  4. recognize and differentiate the origins, motives, and asymmetric nature of global risks and threats to (intangible) assets that have become embedded in all transactions.
  5. understand how materialized risks can adversely affect asset value, a company’s competitive advantages, reputation, brand, and/or stifle project momentum and best practices to prevent or mitigate those risks.
  6. ensure asset control, use, ownership, and value are monitored for sustainability, especially in post-business transaction contexts.
  7. build a risk intelligent culture that renders a company more aware and resilient to significant and catastrophic risks, natural disasters, and/or business interruptions.

Anything less can produce an array of unwelcome challenges or worse, spell almost certain doom to the projected and desired outcomes of a transaction!

Intangible Asset Due Diligence

April 10th, 2012. Published under Due Diligence and Risk Assessments, Intangible asset assessments/audits., Investing in intangible assets.. No Comments.

Michael D. Moberly   April 10, 2012

It’s time prospective investor’s and VC’s get serious!  In my judgment, an important, but all too often overlooked aspect to achieving favorable terms and outcomes to venture capital-backed projects, is balancing (a,) the understandable requisite for putting an experienced management team in place, with (b.) ensuring control, use, ownership, value and materiality of the about-to-be invested intangible assets are sustainable.

A starting point for achieving such a balance is conducting a comprehensive due diligence and assessment of the targeted intangible assets designed to provide prospective investors (VC’s) with an objective and over-the-horizon analysis of the assets’ status.  A equally worthy product of the due diligence and assessment is that it can serve as the foundation for:

  • making the all-important invest – don’t invest decision, or
  • consummating a more secure, profitable, and sustainable outcome for investors.

This level of due diligence and asset assessment must extend well beyond the conventional ’snap-shot-in-time’ or amateurish ‘check the box’ approach.  It must include…

  1. unraveling the assets to identify any/all under-the-radar risks and vulnerabilities that could…
  2. impair and/or entangle particular (intangible) assets and adversely affect investor’s ability to sustain their control, use, ownership, and value
  3. serve as preludes to costly, time consuming, and investment stifling legal disputes and challenges.
  4. identifying all centers of internal and/or stakeholder intangible asset generation, value, and revenue production beyond what is already publicly available.
  5. identifying – assessing existing (intangible) asset production, protection, and value preservation measures and determine if they are effectively aligned with the:

                     a. investors’ objectives

b. company’s strategic business plan, and

                     c.  functional (life, value) cycle of the about-to-be invested assets.

Preferably, depending on the due diligence – asset assessment team’s operational familiarity with intangibles, they would determine if the identified risks can be prevented or mitigated to a (risk) tolerance level acceptable to the investing party so the transaction can proceed.

For start-ups and early stage firms, it is not uncommon for 75% to 90+% of their value, sustainability, projected sources of revenue, and building blocks for growth to directly evolve from intangible (IP-based) assets. This makes intangible asset due diligence and assessments all-the-more essential and potentially revelatory insofar as serving as a foundation, again for invest – don’t invest decisions, relative to distinguishing assets that are suspect, impaired, or have already been compromised.

In these circumstances, while it may not be necessary to wholly abandon a particular investment opportunity, it can prompt prospective investors to include specific (risk mitigation – transfer) covenants that are applicable on both the pre and post transaction side.

It’s unlikely, in my judgment, when an intangible asset due diligence – assessment revels significant risks, merely putting an experienced management team in place would, standing alone, be able to overcome or reverse such transgressions absent costly, time consuming, and momentum stifling legal challenges!  Therefore, having experienced and sophisticated intangible asset specialists conduct the due diligence will reap strategic returns for prospective investors.