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The Financial Impact Of IP Issues in M&A

By Steve Ball and Jon Winter
December 31, 2014

Buyers often fail to consider the financial impact of intellectual property rights in M&A deals. While IP value can be difficult to determine, a target company's financials may rely on IP. For example, a company's financial outlook may be due to patent protection that provides exclusivity and prevents competitors from entering certain markets. It also may be due to goodwill associated with trademark protection, allowing a brand to charge a profitable premium over the competition.

Potential Lost Value

Failure to account for this IP may result in lost value after the deal closes. If patent rights are not properly transferred, the purchaser may no longer even be able to make or sell a certain product. If trademark rights are not properly transferred, the purchaser may lose market share and margins due to forced rebranding. While these seem like fundamental considerations, some of the largest and most public deals often fail to plan for these risks, resulting in significant financial impact.

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