Michael D. Moberly, Principal – Founder, kpstrat – ‘Business Intangible Asset Blog’
Conducting due diligence to-for a business’s intangible assets, particularly those which underlie and play definitive contributory roles – value adds, etc., to a business’s products, services, brands, etc., and/or the valuation, competitive advantage, and revenue generation of a (buy-sell-license) transaction, e.g., how – ways same…
- favorably influence attractivity to either and are, therefore, inevitably, in play, and ‘essential’ to achieving desired – sustainable – competitive – lucrative outcomes,
- providing they remain reasonably intact, sustainable, and defensible.
Respectfully, in my judgement, a key to executing due diligence to-for ‘mission essential’ intangible assets, lies with framing same in pre – post contexts, e.g., not merely as an option, should time – inclination permit, rather, as a (fiduciary-level) obligation which can reasonably assure near term ROI’s.
After-all, increasingly percentages of businesses and their operability today, and for the foreseeable future, are irreversibly intangible asset intensive-dependent, and reliant. That is, 70-80+% of most business’s valuation, competitive advantage, and revenue generation capability-capacity emerge directly from intangible assets a business has developed and holds, i.e.,
- various forms, contexts, and applications of intellectual, structural, and relationship capital which routinely converge as operation culture.
Due diligence to-for business things intangible, is preferably conducted – executed not in a conventional audit format, rather, in pre – post transaction contexts, i.e., differentiation – assessment of particular-assets’ essentiality, defensibility, sustainability, and transferability with their contributory roles and value-adds wholly intact, along with evidence of safeguards and risk mitigation.
Objectives – rationales for conducting pre – post due diligence on essential intangible assets is to…
- unravel and differentiate the various of intangible assets being sought and in play.
- distinguish those assets (individually, collectively, collaboratively) relative to their contributory roles and value-adds, i.e., sustainability, defensibility to a desired outcome.
- assess probability-vulnerability-criticality of particular risk(s) materializing to affect particular – assets contributory roles – value-adds to a brand, product, service, relative to,
- attractivity, competitive advantage, valuation, and revenue generation, and sustainability, post-transaction.
- examine consider the assets ‘transferability’ (introduction – incorporation) to other products, services, brands, and operating cultures.
- consider how particular risks affect particular – assets’ resilience and capability to remain reasonably proprietary and intact.
Business leaders, management teams, boards, and investors (similarly) are (fiduciarily) obliged to recognize 1-5 above, and how variations materialize, and, put forth reasonable efforts to mitigate same…
- especially risks which undermine – stifle – obstruct – complicate – delay the (buy-sell-license) negotiation of a transaction and its execution.
Practically, then, business leadership, management teams, boards, and investors are respectfully encouraged to factor the (a.) presence – absence, and the (b.) mitigate-ability – negotiability of 1 – 5 above, and (c.) if-how the revelation – mitigation of either translates as an indicator and/or predictor of-to the soundness of sought-after intangible assets absent monitoring and re-assessing, regularly vis-a-vis assets’ projected ‘life’ cycle of contributory roles and value-adds.
