Michael D. Moberly November 30, 2012
The former Speaker of the U.S. House of Representatives’ Thoms P. (Tip) O’Neill, is noteworthy for many things, one of which was his often espoused perspective that ‘all politics is local’. We understand that ‘homey’ perspective because it’s very much ‘in your face’ during each national election cycle. But, I’m confident Speaker O’Neill would agree that while most U.S. politics remains local, it routinely has coinciding national, regional, and international implications as well.
In many respects, the same holds true for many business transactions today, particularly when intangible assets are in play, because their origins are often global, not just local. Drawing further emphasis to this lies the economic fact that 65+% of most company’s value, sources of revenue and ‘building blocks’ for (company) growth, profitability, and sustainability evolve directly from an array of intangible assets.
So, very much akin to political contests, most business transactions are conducted in increasingly competitive and predatorial contexts, with winner-take-all outcomes, but, never-the-less, bear local, regional, national, and certainly international implications.
One significant difference between business transactions and political contests, is that business transactions carry fiduciary responsibilities relative to the stewardship, oversight, and management of intangibles in pre and post transaction contexts because among other things, there is a contractual and legal relationship formed between the parties. Whereas, the rhetoric politicians espouse during campaigns is broadly understood as being just that, unaccountable and non-binding rhetoric, until the next election cycle.
Credibility, confidence, and efficiencies and be added to the work of transaction management teams when intangible assets are in play as it increases the probability that pertinent details, particularly those related to sustaining control, use, ownership and monitoring the value and materiality of the assets (pre and post transaction) are considered. In other words, intangibles must and should be fully addressed in any transaction and the transaction management teams’ on-going reports to their c-suite and board regarding transaction progress.
Too, it’s important to bring clarity to business transactions by distinguishing intellectual properties and intangible assets. Conventional forms of IP are actually a subset of intangible assets. IP enforcement mechanisms are well known, i.e., patents, trademarks, copyrights, etc., but are not necessarily synonymous with…
- sustaining control, use, ownership, or monitoring value, materiality, and sustainability of intangible assets, or
- the ability to extract value (commercialization) benefits from a transaction.
Because intangible assets are almost inevitably in play in business transactions, transaction management teams are now well advised to:
- Be consistently mindful of the economic fact – business reality that 65+% of a transactions’ value and ultimately the sustainable economic benefits lie in intangible assets…
- Treat the control, use, ownership, and value of the intangible assets that are in play as business decisions and fiduciary responsibilities integral to relevant legal processes…
- Recognize intangible assets are vulnerable – at risk especially pre-post transaction stages, so techniques to mitigate risks – threats and sustain control, use, ownership, and monitor the assets value and materiality is essential…
- Recognize that if certain risks – threats materialize (pre – post transaction) they can:
- undermine competitive advantages and erode projected profitability
- cause time consuming and costly distractions that disrupt transaction momentum
- ensnare-entangle the assets in costly legal challenges and/or disputes.
Thus, business transaction management teams are encouraged to integrate the above guidance, particularly when transactions involved intangible assets, which they inevitably do today; it will enable-facilitate stronger, more secure, profitable, and efficient transactions, not impede them!
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Please watch for Mike’s book ‘Intangible Assets: Security Managers Roadmap’ to be published soon!