Michael D. Moberly February 22, 2010
In every business transaction today, whether its across the street or around the globe, but particularly acquisitions in knowledge-intellectual capital intensive sectors, growing percentages of the deal will inevitably consist of intangible assets.
For acquisition management teams, the prospect of acquiring (intangible) assets that are (a.) complimentary, readily transferable and exploitable, and (b.) quickly facilitate/enable execution of strategy, should be key drivers for acqusition proposals. This is especially relevant given the economic fact that 65+% of most company’s value, sources of revenue, building blocks for future wealth creation, and sustainability lie in and/or are directly related to intangible assets! In other words, intangible assets will be integral to the deal’s value and outcomes, e.g., achieving the near term and strategic objectives which the acquisition team presumably foresaw.
For the acquiring firm, not-to-be-overlooked factors that underly – add to the probability that the acquisition will be as successful, contributory, and profitable as intended, requires the acquisition team:
1. to recognize that its not solely about asset acquisition, rather it’s about their effective integration and utilization which is an exercise quite different from the acquisition of purely physical/tangible assets, because intangibles (a.) lack physicaliy, and (b.) evolve from – are embedded in intellectual, relational, and structural capital, therefore,
2. acquisition due diligence and management should be designed and conducted to include pre and post contexts (components), e.g.,
a. to unravel and assess the assets’ status, stability (fragility), (legal) defensibility, and transferability – integratability factors, and
b. ensure the assets’ control, use, ownership, value, and materiality are sustainable and monitorable, particulary in post acquisition contexts.
Any acquisition today, or business transaction for that matter, in which the pre and post perspective is not considered or poorly executed, the probability that costly and morale deteriating post-deal challenges will evolve that adversely affect shareholder-stakeholder attitudes and undermine the deals’ success, are almost inevitable!
in today’s extraordinarily predatorial and winner-take-all transaction environment, these (pre-post) perspectives cannot be overstated insofar as the role and contribution of the acquisition management/due diligence team. Why?, because (intangible) asset contributions and value are sometimes quite fragile, that is, they can rapidly erode, be undermined, and/or their potential benefits literally unravel in hours, not days or weeks.