Archive for 'Transaction negotiations and intangible assets.'

Islamic – Sharia Intellectual Property Professional Service Firms (part 1)

June 15th, 2017. Published under Islamic IP, Law Firms, Transaction negotiations and intangible assets.. No Comments.

Michael D. Moberly June 14, 2017 ‘The business intangible asset blog where attention span really matters!’

Introductory Note: This post represents the second in a series of posts intended to encourage, through explanation, professional service (business, law) firms to acquire operational familiarity with Islamic intellectual property and Sharia interpretations as preludes to attracting – engaging clients and negotiating and executing relevant transactions. Readers can be assured throughout these posts, the sovereignty of Islam is respected.

I am most hopeful this post favorably influences professional service firms serving clients in the IA (intangible asset) and IP (intellectual property) arenas to pursue engagements in which parties are guided by principles-beliefs of Islamic (Sharia) law as being a prudent inevitability and not a troublesome threat that prompts trepidation, fear, or concern for (firm) reputation risk.

Intellectual property is not alien to the Muslim religion. Islam is a religion uniting itself in both the spiritual and temporal aspects of life. Understanding of the sources of Islam is crucial to deducing the concepts that support protection of intellectual property. Muslims are obliged to ensure that everything he or she does is consistent with Sharia. Bashar H. Malkawi www.austlii.edu.au/au/journals/SCULawRw/2013/4.pdf

As readers know, there is an abundance of professional service firms with expertise in western IP (intellectual property) law, common to the G7’s, European Union, World Trade Organization member countries, and signatories to Trade Related Aspects to Intellectual Property Rights (TRIPS). On the other hand, it is challenging to identify practitioners and/or firms’ in the U.S.,

• with confidence of expertise and experience regarding the principles
and application of Islamic (Sharia) law.
• to effectively guide clients on IP matters and execute transactions
in which IP and other IA’s are in play, and
• one or more parties to the transaction, or the transaction itself
takes place in a Muslim nation.

An essential requisite to these circumstances, is for the relevant parties to exhibit knowledge and respect for and work toward achieving the point at which the principles of both western and Islamic (Sharia) IP law can respectfully fuse to effectively negotiate and execute the transaction.

Of course, some professional (business, law) service firms rationalize their reluctance to engage clients – projects in which Sharia law will be a factor, in-light-of periodic and public anti-Sharia rhetoric and protests, which, in some instances, materializes as intolerant legislation.

Of course, there are over-riding geo-strategic economic indicators for PSF’s (professional service firms) to acquire operational level familiarity about how Islamic law treats the development, ownership, value, and transfer of intellectual capital, i.e., products of one’s mind, be it in individual, entrepreneurial, and/or business-to-business (technology transfer) contexts. Doing so entails horizonal thinking-looking PSF’s, e.g., law firms, etc., to acquire current operational level familiarity with the foundations, principles, and interpretations upon which Islamic – Sharia intellectual property law is based and applied.

Certainly not for-the-purpose of challenging Sharia or destabilizing its influence. Rather, because it is a universal and irreversible economic fact that 80+% of most companies, organizations, and institutions’ value, sources of revenue, and foundations for growth, and sustainability lie in – emerge directly from intangible-IP assets.

This reality should be instructive to business services (law) firms in the form of obligations to achieve familiarity with Sharia interpretations of Islamic IP law. The rationale for doing so lies in the economic fact that all forms of IA’s, e.g., intellectual properties, are increasingly integral to every transaction outcome. Operational level familiarity of Islamic IP law and Sharia interpretations will lead to respectful and important insights and strategic guides for negotiating transactions in which win-win outcomes are obligatory.

Fortunately, there are new – current academic (legal) research papers that shed much needed and practical light on both the fundamentals and intricacies of Sharia influence on Islamic intellectual property law. Studying these papers closely guide parties to transactions to minimize reckless and misguided assumptions and making irreversible errors insofar as introducing, proposing, and negotiating a transaction without subordinating or disrespecting western IP law to Islamic IP law.

A particularly useful paper in this regard, and one which I frequently reference is authored by Silvia Beltrametti titled ‘The Legality of Intellectual Property Rights Under Islamic Law’.

A particularly beneficial aspect to Beltrametti’s work is that she does not intend for it to serve, in any way, as a basis to sort out the conventions and/or distinctions between western and Islamic IP laws, regulations, and standards for an imagined or presumed (future – eventual) convergence. Readers would be correct to assume that is my intent here as well.

That said, in my judgment, professional services (business, law) firms that purposefully take strategic initiative to acquire even a rudimentary understanding of and respect for Islamic (Sharia) law and its relevance and application to negotiating and executing transactions is a feature which firms can correctly promote in the context of being an ‘early adopter’ which in turn, elevates the bar for a firm’s competitiveness, reputation, goodwill, and foresightedness.

Sharia law today is often conceived and portrayed through extremely disturbing media visuals applied by its most extreme elements, i.e., Al Quaeda, ISIS, Taliban, etc. Reasonable persons recognize such horrific acts-behaviors are not representative of the whole of Islam. Similarly, some are inclined to suppose the volume of Islamic refugees migrating (escaping) throughout the EU since 2015 and variously to the U.S. and elsewhere, marks the onset of conspiratorial efforts to converge Islamic – Sharia law with western religiosity with dilution and subordination being a predictable outcome. It remains admirable for professional service firms to understand the distinctions and practicalities of Islamic (IP) law and the various Sharia influences and interpretations because doing so can lead to respectful insights and likely collaborations and transactions going forward.

Among other important aspects of Dr. Beltrametti’s work regarding Islamic intellectual property law, is that it is, in many respects, in its early stages of interpretation and promulgation in terms of modernity. Ms. Beltrametti, a JD from the University of Chicago with an emphasis/specialty in IP, states that intellectual property rights, per se, are not regulated by Islamic law and its jurisprudence. Rather, the question or issue, she posits, is whether the principles of Islamic law can be practiced in a manner that provide for IP rights enforcements and safeguards. Professor Beltrametti does this initially by presenting Sharia’s main sources; the Qur’an, the Sunna, Ijma and Qiyas. I should note that the term Sharia, as applied throughout Beltametti’s paper, is synonymous with Islamic law.

Appropriately, Beltrametti notes tensions remain between the predominantly Western, and Islamic (Sharia influenced) perspectives of intellectual property rights, as well as the economic role these intangibles play. Ms. Beltrametti subsequently offers an intriguing and somewhat surprising characterization, i.e., Sharia-based (legal, intellectual property rights) system is flexible and adaptable, characteristics which are not often associated. Perhaps such measured flexibility and elasticity can be exploited by all parties to reflect the economic fact that 80+% of most company’s value, sources of revenue, and foundations for growth and sustainability today reside in or evolve directly from intangible, often IP-based assets.

Comments and questions regarding this post may be directed to m.moberly@kpstrat.com.

M&A Intangible Asset Advisory

June 8th, 2017. Published under Mergers and Acquisitions, Transaction negotiations and intangible assets.. No Comments.

Michael D. Moberly June 8, 2017 ‘A business intangible asset blog which attention span is necessary’.

There have been countless articles, books, and essays written regarding every conceivable aspect to M&A’s (mergers and acquisitions). Strangely, I find most, at least through my lens, overlook, or omit the role and contribution of intangible assets to the outcome. After all, it is an economic fact – business operation reality today, as it has been for the past 20+/- years, that 80+% of most company’s value, sources of revenue, future wealth creation, and competitiveness lie in – emerge directly from IA’s (intangible assets).

So, would it not be prudent for parties to M&A’s to secure representation from sources well versed in IA matters, especially due diligence and sustaining control, use, ownership, and mitigating risks? Because, after all, it’s the IA’s which are often the catalyst and incentive for M&A’s and certainly critical to the outcome.

Starting in the mid-to-late 1990’s, I had the good fortune, and perhaps good sense, to read-study early products (chapters) of a multi-year project undertaken by The Brookings Institution titled ‘Understanding Intangible Sources of Value’. The principle investigators-authors of the project, several of whom I engaged at the time in discussion for clarity and insight, were a strong troupe of forward looking-thinking practitioners.

IA’s however, prompt debate, less today about their existence and contributions and more about how to value and report IA’s. In other words, conventional financial statements and balance sheets largely exclude or, at the very least, minimize the contributory role and value of IA’s. Thus, most portraits of a company’s financial wealth, health, potential, and competitive standing are, in my judgment, incomplete.

In the M&A arena, it’s important, more so today than perhaps ever before, to recognize that merely because an M&A has been proposed, appears promising, and has progressed to a conventional due diligence stage, does not constitute assurance that any of the projected-anticipated value, synergies, efficiencies, scalability, and competitive advantages are fully capturable, will materialize, or be sustainable. Therefore, IA specific (pre-post transaction) due diligence is a necessary component in deal consummation.

To reasonably assure projections and outcomes will materialize as intended, the due diligence must be sophisticated to recognize the IA’s in play, which includes identifying, unraveling, and assessing asset fragility, vulnerability, sustainability, and transferability in both pre, and post monitoring contexts. Transaction negotiations today are aggressive, competitive, predatorial, and generally manifest as winner-take-all outcomes. Under these circumstances, dismissing and/or relegating the posture and standing of key intangible assets to mere hope and trust is fiduciarily suspect at best.

I have had the privilege to engage many business strategists and decision makers in private conversation. I have no recollection of any disputing my advocacy for IA due diligence for transactions. Assuming these conversations are representative, it would seem prudent that IA’s would be duly considered in every business transaction process.

This post, in part, was inspired by Generational Equity piece titled ‘Precision Sourcing’.

Intangible Asset Unfamiliarity

May 11th, 2017. Published under Intangible assets contributory value., Transaction negotiations and intangible assets.. No Comments.

Michael D. Moberly May 11, 2017 ‘A business intangible asset blog where attention span really matters!’

Not infrequently, when a particularly challenging and risky business transaction is undertaken by a company, but ‘goes south’, it should prompt review by an IA strategist and risk specialist. If so, one likely revelation is that transaction under-performance or failure is variously attributable to operational – circumstantial unfamiliarity with, how, when, why, where, and which IA’s were in play but, not acted on effectively, lucratively, or competitively. Or, the IA’s were insufficiently safeguarded with risks left unnoticed, unmonitored, and unmitigated to influence one or both parties to ‘walk away’.

IA unfamiliarity, frequently translates-materializes as the omission of IA’s from transaction planning and execution, which leaves their contributory role and value, projected sources of revenue, and competitiveness out of a transaction’s ‘go, no go’ equation, and otherwise, off the (transaction) negotiating table. It is true, that the dominant drivers and ‘underwriters’ to most every business transaction are the IA’s which are and will inevitably be in play. As such, they will be vulnerable-receptive to various types-levels of risk, e.g., competitive advantage under-mining, targeted erosion of (asset) value, and/or numerous types-levels of compromise.

It is necessary today, that businesses and their management teams recognize risk can materialize in other than single, unrelated acts or events. Quite the opposite, any one, or multiples of risks may occur simultaneously and/or in ‘chain reaction’ contexts and wholly negate or substantially minimize projected-desired outcomes, even more so when (IA) unfamiliarity and risk mitigation are either absent or executed in a mediocre manner.

Similarly, poorly planned and executed business transactions that experience underperformance or failure are seldom, if ever, ‘one off’ events, but, never-the-less, may be redeemable. With numerous (IA dominant) engagements behind me, I have come to conclude that not an insignificant percentage of the issues businesses and management teams experience regarding their IA’s, irrespective of how evident and present they are, is variously attributable to those assets being ‘non-physical’, i.e., outside conventional (human) senses of sight, sound, touch, or smell, and therefore, they find it intellectually challenging to converge (the intangible) with the conventions of tangible-physical assets. Another consequence of asset ‘intangibility’ is that it can dissuade some business leaders and management teams from recognizing IA’s as being relevant players and/or contributors to company value, competitiveness, revenue, or sustainability.

It is true, a percentage of business leadership, remain variously dismissive and under-appreciative of IA’s, i.e., what they are, and how to utilize (exploit) them effectively, lucratively, and competitively, in other words, recognizing their contributory role, value, and competitive advantages which they can, and often do, produce. Not so coincidentally then, when IA’s are treated dismissively or wholly neglected, their contributory value can be significantly weakened, conceded to competitors, or relegated to the non-denominational and virtually unusable ‘catch-all’ of goodwill.

Either way, I find there is no single mechanism to overcome these real and detrimental shortcomings, aside from seeking – achieving operational level familiarity with IA’s for which one has control, use, ownership, and (fiduciary) responsibility to safeguard, exploit, monetize.

Consistently, I find, practitioners who possess operational familiarity with IA’s, especially those in play to a transaction or initiative as contributors to projected value, revenues, competitive advantages, and marketing and branding outcomes, also possess operational insights that extend well beyond merely what’s posted on conventional financial statements and balance sheets.

As always comments are welcome!

Intangible Assets Integral to Transaction Negotiation Strategy

February 14th, 2017. Published under Business Transactions, Intangible asset strategy, Transaction negotiations and intangible assets.. No Comments.

Michael D. Moberly February 14, 2017 A business blog where attention span really matters!

Management teams’ who commence negotiating a business transaction based on a strategy which has been framed predominantly, if not solely, on the content of a (conventional) balance sheet and/or financial statement, which as noted here, are variously dismissive of – omit acknowledging contributory role, value, and competitive advantages produced by IA’s (intangible assets) will lead (unnecessarily) to impasses and/or ‘walk-aways’. Both rise in probability when either party enters a negotiation absent benefits of being operationally familiar with the IA’s that will inevitably be in play!

True, IA’s are seldom, if ever reported (accounted for) in conventional financial statements, balance sheets, or valuations. Such omissions (under or non-reporting of IA’s) are tolerated because accountants, auditors, valuators, tax, and legal sectors are obliged to interpret – report IA’s in accordance with the various standards-statutes set forth by relevant state-federal regulatory-oversight bodies, academic disciplines, and professional association certification. Operationally, these obligations, given their origins in statutes and standards, translate as predispositions to conceive- apply IA’s in quite narrow contexts, and perhaps worse, are likely to be characterized as mere conglomerations of undifferentiated goodwill. Please note, for the record, ‘goodwill’ is but one (single) type or category of IA.

Of course, those perspectives about IA’s stand apart from the broader – more expansive context for addressing – executing on IA’s espoused here which solidly originate in the economic fact – business reality that 80+% of most company’s value and sources of revenue, etc., lie in – emerge directly from IA’s. This economic fact should not go in-noticed or under-estimated, particularly when negotiating most any transactions’ value, competitive advantages, sector standing, and future performance.

Achieving operational familiarity with IA’s in advance, warrants attention here and now because anyone with responsibility for negotiating a business transaction, but commence it, absent familiarity with IA’s will surely find themselves, and whomever they represent, negotiating with an incomplete portrait of the other parties assets, how those assets will be (are) in play, and can influence (negotiation, transaction) outcomes, i.e., success, sustainability, and profitability, or failure. This oversight (neglect, dismissiveness) can also serve (unnecessarily) as entrees upon which (negotiation) confusion, distortions, unsubstantiated generalities, impasses, and walk-aways will undoubtedly occur.

So, in my judgment, business leadership and management teams that have achieved IA operational familiarity in advance of a transaction overture, i.e., they recognize the presence, contributory role, value, and competitive advantages produced by IA’s, will clearly have a strategic (lucrative, competitive) advantage. This is particularly apropos as growing percentages of industry, trade, and commerce, globally, originate from IA intensive and dependent businesses.

With respectful confidence, the clarity, differentiation, performance measuring, and valuing of IA’s advocated here and recognized as (transaction) negotiation requisites, will sure to lead to more lucrative, competitive, and sustainable (project, transaction) outcomes, whenever, however, or wherever IA’s, are in play.

On the other hand, when-if transaction negotiations, preliminary or otherwise, are undertaken absent leadership-management team acknowledgement for IA development, contributory value, competitive advantage, materiality, and risk, etc., will likely experience outcomes that produce substantially less value, revenue, competitiveness, and sustainability that projected and desired, which frequently translates as some level of failure and unnecessary squandering of resources with little or no return.

Prudent objectives for business leadership and transaction negotiation management teams are to…

• acquire sufficient operational familiarity with key (operational) IA’s of
their firm, but equally important, the firm(s) in which interest is being
exhibited.

• of course, learning how to do this objectively and distinguish
the relevant from the irrelevant are essential in terms of efficiency,
effectiveness, and framing strategy-tactics and values.

Respectfully, it’s worth noting again, if IA’s are omitted, dismissed, or otherwise deemed irrelevant to a (business transaction) negotiation in which IA’s and tangible-physical assets will be bought, sold, traded, etc., but subordinates the IA’s in play to convention and/or past practice, it’s likely outcomes will be measurably less lucrative, competitive, and sustainable, but carry higher risks, as they otherwise could.

On the other hand, correctly identifying IA’s in play, whether it is for strategic-tactical planning, decision making, and/or negotiations are not responsibilities relevant only to Fortune-ranked firms. Instead, IA’s play clear and important roles in small and medium-sized companies, businesses, and start-ups!