the economic tsunami: key issues in ip due diligence
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© 2009 CONSOR
The Economic Tsunami:Key Issues in IP Due Diligence
and Monetization
The Value Perspective
Presented by:Presented by:Weston AnsonWeston Anson
CONSOR Intellectual CONSOR Intellectual Asset ManagementAsset Management
858.454.9091 858.454.9091 www.consor.comwww.consor.com
wanson@consor.comwanson@consor.com
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Five Critical Elements of Value Maximization
1. Know where maximum strategic and realizable value is
to be found in the asset portfolio
2. Establish a realistic current market value for the assets
3. Understand how to extract maximum value from the
assets
4. Select the best possible intellectual property / intangible
asset strategy for the situation
5. Manage the process
3
Who Cares About Maximizing IP Value?
Merger and
Acquisition Interests
Shareholders
Tax Authorities
Auditors
Wall Street Analysts
Other Stakeholders
Internal Asset Managers
Partners
International Affiliates
The Media
Finders of Fact
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When Is Valuation Necessary?
Strategic assessment of whether the IP assets be sold separate from the business
Negotiation of “stalking horse” bids and initial asset bundle pricing structures
Evaluation of bids for global asset portfolio versus individual asset buyers
IP assets to serve as collateral for various forms of financing
Purchase price allocation analysis of IP-related transactions
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Identify IP / IA Bundles for Value
Stratify IP / IA Core v. Periphery
Peripheral portfolios may be monetized Vertical and horizontal Out-licensing / Spin-off
Analyze quality of IP Relevancy to current / future business Relative strength analysis
Potential infringement assessment
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Monetizing IP Assets
Monetization Alternatives Sale / Auction License Creditor Settlement Sale & Leaseback Securitization Litigation
Securitization Alternatives Line of Credit Take-out or DIP Interim Long term
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Intangible Asset Bundles
1. Trademarks6. Corporate Identity
Assets11. Real-Estate Related
Assets
2. Other Brand-Related Assets
7. IP Contracts12. Communications-
Related Assets
3. Patent-Related
Bundles of Value8. IT/Software
13. People-Related Assets
4. Internet-Related
Assets9. Data/Information-
Related Assets14. Other Technology
Assets
5. Product-Related Assets
10. Research-Related Assets
15. Miscellaneous Assets
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IP & Intangible Assets
Intellectual Property
PATENTS
COPYRIGHTS
TRADEMARKS
TRADESECRETS
Intangible Assets
Data &Knowledge
Bases
COPYRIGHTS
Customer& VendorRelations
ProprietarySoftwareProprietary
SoftwareInternetAssets
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Case StudyMulti-Jurisdiction Bankruptcy and Sale
The Americas U.S. Canada Mexico Brazil
Europe Belgium Spain Sweden Czech Republic Netherlands United Kingdom Germany Italy
A leading global supplier of interiors to automotive A leading global supplier of interiors to automotive industry (70% of U.S. instrument panels), with operations industry (70% of U.S. instrument panels), with operations in:in:
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U.S. IP Issues
IP not to be sold outright Need for continued use in North America Reserve right to return to Europe
Non-exclusive use imperative Buyer could be competitor in U.S. and worldwide
Valuation must be comprehensive Intangible assets transferred with operations greater
than strictly intellectual property rights
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IP Assets Identified
Patents (74 total, 12 in current use and to be licensed) Product design features (invisible air bag door) Manufacturing process improvements (heat transfer
and molding techniques)
Trademarks (transitional use only) Collins & Aikman Invisitec, Akro-Edge, AcT
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Other Intangible Assets
Trade Secrets Embedded in shop-level manuals and design centers
Know How Including computerized knowledge bases, and just-in-
time sequential parts delivery technology Goodwill
Reputation for design, materials knowledge, and manufacturing expertise and capabilities
Relationships with engineering divisions of all major auto manufacturers in the world
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U.S. Approach to Appraisal
Know-How and trade secrets valued as being transferred in a bundle with patents and tangible plant assets
Value marketing bundle components by plant / country based on contract activity and transitional licensing structure
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Summary By Country
COLLINS & AIKMAN -- EUROPEValuation Summary by Country
as of June 30, 2005In thousands of U.S. Dollars
CountryPatented
Technology Valuation
Know-How & Trade Secrets
Trademark & Goodwill
Royalty (One Year)
Total IP / IA Value
Belgium- 2,834 429 3,263
Brazil- 781 118 899
Czech Republic1,681 2,026 307 4,014
Germany- 2,819 427 1,324
Italy1,631 3,109 471 5,211
Netherlands9,742 2,075 314 12,131
Spain- 3,535 536 4,070
Sweden290 2,804 425 3,519
U.K.- 3,157 478 3,636
Total 13,344$ 23,139$ 3,506$ 38,067$
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Result: Negotiated Sale
U.S. Appraisal Total IP value in the range $37.7 — $40.8 million*
USD 88% tech bundle, 12% marketing bundle
Liquidation value discounted to $16.7 — $18.2 million* USD 90% tech bundle, 10% marketing bundle
Negotiated Sale of IP license $19.25 million USD
Approved by Court February 2006* Values are changed by a common factor
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Conclusions
Dual venues and agendas created unique challenges and timeframes
Comprehensive IP / IA due diligence identified more than 10x ordinary value extraction
Proof that intangible assets, not just IP like patents and trademarks, can be monetized
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Summary
Identify all IP / IA in the current project Understand the context for historical and potential
use of the assets Triage the assets by quality and priority Bundle the assets for optimal effectiveness Benchmark valuation
Liquidation context End-use dependent
Market the assets / close transactions Licensing Sale or other disposition
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QUESTIONS AND ANSWERS
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