Putting Price Tags On Intangible Assets

Assigning a value to the purchase and transfer of intellectual capital from one company to another…is challenging in the best of circumstances, even more so when that ‘know how’ is valued at $1.1 billion!  Specifically, Google announced recently its intent to purchase particular intangible assets, currently held by HTC, for application to their mobile (smartphone) division and business.

In other words, Google is seeking to purchase specific…(a.) structural, (b.) relationship, and (c.) intellectual capital (intangible assets) developed and held by a known – targeted group of HTC employees.  The epitome of an intangible asset transaction, right!

Worthy of mentioning…previously, in 2011, Google made another proposal; a $12.5 billion offer to buy Motorola’s smartphone manufacturer, Mobility.

That transaction however…went south, and subsequently came to be referred to, in a not-so-favorable favorable context, as ‘the Motorola experiment’.  Perhaps, one reason for this non-deal, was that proposal, encompassed more than specific intangible assets associated with Motorola’s smartphone manufacturing side.  If that was the case, I suspect the outcome could have materialized differently and better had an experienced intangible asset strategist and risk specialist been invited to offer their counsel.

Insofar as this current (proposed) transaction is concerned…one presumes, Google decision makers believe, should the proposal materialize, it will lead to ‘creating attractive user experiences to advance their (Google’s) Android ecosystem’.

Being an intangible asset strategist and risk specialist…this recent proposed transaction initiated by Google, represents, through this lens, as a ‘millennialized’ example of a motivated buyer, i.e. Google, assigning a dollar value to (intangible) assets held by a motivated seller, i.e., employees of HTC’s mobile division.

This proposal, as characterized in various business media…

  • the buyer (Google) anticipates – projects, and presumably has methodically measured, this transaction will produce relatively quick, attractive, and competitive returns in the Android marketspace.
  • otherwise why would Google seek to purchase existing – external intangible assets, i.e., intellectual and structural) capital, particularly?

Prudently, this transaction, should it materialize as desired…includes a non-exclusive license, presumably directed to (intangible) intellectual capital the about-to-be-acquired HTC employees possess, as well as other relevant (valuable, competitive advantage) intangibles that will be cited in the sale document.

Moving past the ‘Motorola experiment’…presumably things have changed at Google, claims Rick Osterloh, Google’s hardware chief, ala “these (2,000) future – fellow Google employees (being purchased from HTC) are amazing, and we’re excited to see what we can do together, as one team.”

Being variously experienced in the ‘movement – transfer’ of all things intangibleI can reasonably assure Google multiple challenges lie ahead. One for sure, will involve the efficient integration and application of the purchased intangible assets, i.e., peoples intellectual, structural, and relationship capital in a timely manner – to a different corporate culture.

Prospective buyers of any intangible asset, are obliged to…know, matter-of-factly, where, how, when, why, and by whom the intangibles originated-emerged and developed. Preesumably, the intangible assets now in play (for sale) functioned – performed well in their HTC environment.

However, an unknown in my judgment (perhaps a risk )…is how newly acquired intangible assets will (individually, collectively) integrate – collaborate, function, and perform when applied to a new (Google Android) environment.

So, again, through my lens, and as an intangible asset strategist and risk specialist…it may be preferable to engage in transactions once the unknowns become knowns, i.e., intangible asset performance and functionality in their new environment, are fully assessed.  This preference is especially apropos in this instance, in which Google is spending $1.1 billion to purchase very specific – targeted intellectual capital which likely was born, reared, raised, and thrived in an HTC environment. Those of us familiar with the various operating, collaboration, and application cultures – environments that exist among Silicon Valley companies, recognize the relevance of the ‘intangible asset sides of business’.

Analogy of purchasing another company’s intellectual capital and major league baseball’s free agency…the transaction between Google and HTC is variously relevant to the late American baseball player Curt Flood who became a pivotal figure in sport’s labor history when he refused to accept a trade following the 1969 season as a player with the St. Louis Cardinals.

  • Mr. Flood’s case was ultimately appealed (unsuccessfully) to SCOTUS…the legal challenge Flood brought, was against MLB team’s ‘reserve clause’.  The case produced solidarity among professional baseball players in their efforts to seek free agency status, which they now have.

To be sure,   am not advocating private sector employees exist under a MLB’s reserve-like clause…contractual (employee-employer) relationship. I do find it extraordinarily interesting though, that Google’s intangible asset valuation team has assigned a specific dollar value, i.e.,  $1.1 billion, to approximately 2000 people, perhaps without engaging them in an ‘intellectual, structural, and relationship capital combine’, conducted in real time!

…the person who elects not to read has little or no advantage over the person who cannot read! (Variously attributed to Samuel Clemens, adapted by Michael D. Moberly.)

Michael D. Moberly St. Louis September 25, 2017  [email protected]   the Business Intangible Asset Blog since May 2006, 600+ published blog posts, ‘where attention span, business realities, intangible assets, and solutions converge’.

Readers are invited to explore other blog posts, video, position papers, and books at https://kpstrat.com/blog

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