Requisites to conducting superior due diligence…for today’s intangible asset dominated and driven businesses include (a.) having operational familiarity with all things intangible, and (b.) investigative skill sets to identify and unravel asset origins, ownership, and contributory role and value.
These are unique differentiators which collectively…serve as starting points for achieving the necessary insight to assets that allow management-transaction teams to make informed decisions, i.e., proceed, don’t proceed, buy, don’t buy, or invest, don’t invest!
Respecting the economic fact that 80+% of most company’s, and therefore, transaction’s value…sources of revenue, and foundations for growth and sustainability evolve directly from intangible assets, selecting not just the right, but, the absolute best transaction team to conduct the due diligence is critical to achieving the projected-desired outcome. Effective understanding, assessment, and integration of intangibles in the due diligence serve increasingly significant roles to a transaction’s success.
For starters, a well-designed and executed due diligence plan…must fully examine each of the target’s intangible assets and distinguish each by their respective contributory role and value to a specific project or the target as a whole. Experience suggests that, with untold frequency, when intangible assets are dismissed and otherwise not addressed during due diligence, transaction downsides can be imminent and materialize in a long, slow, and costly fashion, i.e., the proverbial, ‘failure by a thousand cuts’.
To increase the probability that specific (projected) transaction objectives and/or outcomes will be realized…it’s imperative, in my judgement, that the individual or firm assigned (contracted) to conduct the due diligence have sufficient operational level familiarity with intangible to articulate their findings in objective business contexts, absent the generic tone of one-size-fits-all – snap-shot-in-time guesstimates.
Key components to superior due diligence in today’s intangible asset dominated and driven businesses…start by possessing the experience, knowledge base, and investigative insight to…
1. unravel (identify) how, where, and by whom the key (intangible) assets originated.
2. determine and assess how or whether control, use, and ownership of the assets is sustainable.
3. determine the assets’ contributory value and complimentary role(s) relative to existing, as well as, future – projected initiatives in terms of sources of revenue, competitiveness, and foundations for (future) growth and sustainability.
4. recognize and differentiate the origins, motives, and asymmetric nature of global risks and threats to (intangible) assets that have become embedded in all transactions.
5. understand what and how (probability, vulnerability, criticality) for particular risks materializing to adversely affect asset value, a company’s competitive advantages, reputation, brand, and/or stifle project momentum.
6. best practices to prevent – mitigate those risks by…
- assuring asset control, use, ownership, and value are monitored for sustainability, especially in post-business transaction contexts.
- building a risk intelligent culture that renders a company more aware and resilient to significant and catastrophic risks, natural disasters, and/or business interruptions.
Anything less can produce an array of unwelcome challenges…or worse, spell almost certain doom to the projected and desired outcomes of a transaction!
Michael D. Moberly May, 31, 2012 St.Louis [email protected] ‘The Business Intangible Asset Blog’ where attention span and action really matter!