Due Diligence: It’s All About Sustaining Control, Use, Ownership, and Value Of Intangibles!

Michael D. Moberly    May 15, 2009

Intangible assets (intellectual property, proprietary know how, reputation, image, goodwill, etc.) can advance a company economically and competitively, in deals and transactions, only so long as their control, use, ownership, and value are consistently monitored and sustained!

It’s important to recognize, once again, that growing percentages (65+%) of most company’s value, sources of revenue, sustainability, and future wealth creation are attributed to – directly linked to intangible assets.  The relevance and value assigned to those assets can fluctuate which requires methodologies for monitoring and assessing that value fully reflect the life and functionality cycles of the assets in play – part of a deal.

Similarly, a company’s portfolio of proprietary (sensitive) information and trade secrets evolve over time, in part due to various practices company’s employ for internal classification (re-classification) of information.  While some information is considered sensitive and fall into trade secrecy status, those classifications will vary with some information becoming outdated, and may ultimately bear little or no relationship to the types of information a  company ultimately must, and should be safeguarded.  The effectiveness of information security and classification policies and procedures diminish rapidly if such fluctuations go un-recognized, un-monitored, or un-reported.

Some information can literally become obsolete because, among other things, it no longer possesses commerical or competitive value, while new information is constantly being produced (generated) and can rapidly escalate in value, but, again, if un-recognized as such, its vulnerability to compromise or inadvertently entering the public domain rise, and, once there, value will quickly go to zero!  Therefore, recognizing that the production of information assets is a dymanic, not a static process, and is an important and necessary first step in ensuring business transactions, in which intangibles and IP are in play, are as successful as the parties’ intended and demand!

Today, most business transactions are extraordinarily competitive, predatorial, globally intertwined, and ‘winner-take-all’ oriented, for which there is no single, stand alone information protection platform that is adequate.  Absent a thorough appreciation that the end game for most any transaction is to sustain control, use, ownership, and value of those (information-based) assets in both pre and post transaction contexts, then favorable transaction outcomes will surely be in jeopardy before the ink dries!

More succinctly, when engaging in any type of transaction in which (information-based assets) IP and intangibles are being bought, sold, transferred, or licensed, its essential to ensure that (a.) due diligence is as good on the front end (pre-transaction) as it is on the back end (post transaction), (b.) due diligence does not succumb to faux sense of urgency, i.e., an entire deal must be fully vetted in 48 hours, and (c.) conventional templates for conducting due diligence are challenged, that is, when 65+% of a transactions’ value lie in intangible assets and IP, presumably, the ability of the parties to sustain control, use, ownership, and value of those assets and conduct thorough on-site interviews and assessments become necessities with little or no room for negotiation!

 

 

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