Before Negotiating Intangible Assets, do this…

Michael D. Moberly, Principal, Founder, kpstrat

Respectfully and experientially, there is a general absence of operational familiarity with the various types of intangible assets which business’s routinely – repeatedly acquire, develop, nurture, apply, exploit, and commercialize – monetize (ethically).

Ominous influencers to this oversight are accountants, auditors, valuators, tax, and legal sectors are obliged to interpret – report intangible assets in accordance with existing standards and/or statutes

Operationally, these obligations, given their origins in statute or standard, unnecessarily translate as predispositions to conceive- apply business intangible assets in narrow, somewhat ‘tangible’ contexts.

Perhaps more adverse to business operation and value, are convention-based (accounting, valuation) dispositions – predilections which characterize business things intangible as mere conglomerations of undifferentiated goodwill, if not wholly dismiss same.

  • Please note, ‘goodwill’ is but one type or category of intangible asset. To examine the 17 categories – types of intangible asset, please review papers at ‘shop business intangible asset blog’.

Experientially, continuing to ply these narrow – conventional perspectives (criteria for what constitute) intangible assets…

  • seldom encompass intangibles various contributory roles and value to business operation, value, and competitiveness, etc.
  • nor do such conventions lead to a broader – more expansive (more correct) contexts for recognizing how can be lucratively, competitively, ethically, and routinely – repeatedly exploited as is demonstrated throughout this blog, i.e.

the globally universal economic fact – business reality that 80+% of most company’s value, sources of revenue, competitiveness, and sustainability, etc., lie in – emerge directly from intangible (non-physical) assets.

When – if this economic fact goes un-noticed, or is dismissed ‘assets’ will be under-estimated, or they may be wholly overlooked or omitted from a business (buy – sell – license – transfer) negotiation. Not a good thing!

  • However, the assets will remain in play, i.e., in the form of value, drivers of revenue, competitive advantages, sector standing, and future performance, but will not likely benefit those whom they should and can.
  • Instead, its likely valuable – competitive – revenue generating intangible assets ‘will be left on the proverbial negotiating table’ for others to negotiate and benefit at some other time and in another (albeit) similar circumstance.

To be sure, when such oversights occur (and they do all-too-often) at least one of the parties to the initial transaction negotiation, will likely be smiling, providing they are ‘the one’ who is operationally familiar with and the holder of the intangibles assets others seek and covet.  

That is, it is less likely the holder of the assets will needlessly – unwittingly experience an irreversible financial loss (of selling assets below their contributory role and value) and/or experience a self-imposed business risk (see it materialize) rooted in unfamiliarity and inexperience with their own ‘business things intangible’.

I am not aware of their being off-the-shelf – one-size-fits-all (strategy – tactic) templates demonstrating how to effectively negotiate the acquisition, i.e., buying, selling, licensing, or trading, etc., of one businesses intangible assets’ to another business.

Respectfully, the options for seeking – acquiring – utilizing these essential insights (to business things intangible) as espoused here, lie largely today with

  • comparatively small groups of independent practitioners (in the U.S. and elsewhere),
  • individuals who have acquired the relevant expertise, engagement experience, and standing, and variously applied same,
  • to legitimately being a ‘business intangible asset strategist and risk specialist.’

Insofar as commencing negotiations to acquire another’s intangible assets, achieving operational familiarity with a targets’ (mission essential) intangibles is obliged to be recognized as a prudent prelude for which there should be no shortcuts sought, presumed, nor taken.

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