Michael D. Moberly July 28, 2009
While intangible asset assessments and inventories have relevance to both the buy and sell sides of a transaction, a buyer who elects to conduct neither is elevating the transactions’ risk factors, i.e., the probability that one or more of the assets will be significantly impaired. The reason? Risks to transactions and the IP and intangibles in play today are far too consistent, far more likely to occur, and far too easy to execute by adversaries and competitors. Ultimately, the assessment/inventory findings can serve to guide the transaction management team thresholds for asset risk. For example, if the assessment-inventory reveals significant risks that cannot be sufficiently mitigated or (transaction) terms renegotiated, should the transaction proceed, and if so, what’s the probability the transaction objectives are still achievable?
Among other things, the assessment (inventory) will test the in play assets relative to their ability to sustain the transactions’ projected (a.) objectives, (b.) returns, and (c.) exit strategy under various circumstances and scenarios, e.g., embellished respresentations, fraud, misappropriation, business intelligence, and infringement, etc., by:
1. Identifying, sifting through, and unraveling any embedded – intertwined intangibles and competitive advantages relevant to the transaction…
2. Identifying and assessing any under-the-radar risks, threats, and vulnerabilities that can entangle and/or ensnare the assets in costly, time consuming, and momentum stifling disputes or challenges…
3. Assessing the adequacy and effectiveness of any asset safeguards that have been in place (pre-transaction) relative to preserving the assets’ value and usability…
Using these principles, the assessment/inventory can deliver timely and relevant insight to transaction management teams by:
1. Alerting them to significant vulnerabilities and risks that warrant immediate attention, but yet may be favorably leveraged (re-negotiated) prior to deal closure…
2. Bringing operational, economic, and strategic clarity to the intangible assets that are in play, particularly those relevant to achieving a favorable outcome…
3. Identifying the most effective asset safeguards and value preservation measures that (a.) reflect the circumstances of the transaction, and (b.) are aligned with the transactions’ objectives including the life-value-function cycle of the assets!
And, as always, the overarching objective is to enable a more secure and profitable transaction to go forward, not impede it!
