Intangible Asset Due Diligence…It’s Important.

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…

  1. unravel and differentiate the various of intangible assets being sought and in play.
  2. distinguish those assets (individually, collectively, collaboratively) relative to their contributory roles and value-adds, i.e., sustainability, defensibility to a desired outcome.
  3. assess probability-vulnerability-criticality of particular risk(s) materializing to affect particular – assets contributory roles – value-adds to a brand, product, service, relative to,
    1. attractivity, competitive advantage, valuation, and revenue generation, and sustainability, post-transaction.
  4. examine consider the assets ‘transferability’ (introduction – incorporation) to other products, services, brands, and operating cultures.
  5. 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.


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