IP valuation: Knowing your worth at the negotiating table

Author
James Cortis
Content Producer | Business West
28th September 2020

For many SMEs, the value of their company lies not in their physical tangible assets, but in their Intellectual Property or their “Intellectual Assets.”

Often, people will say ‘but I don’t have any IP because I don’t have a patent’, but patents are only one of the many Intellectual Assets that businesses possess - and over which they have legal rights.

Your intellectual property or assets include a host of areas-trademarks, copyright, designs, goodwill, relationships, data, employment, supplier contracts and more – all of which have value. Yet only 26% of innovative SMEs responding to a recent government survey said they had carried out a valuation on what is effectively the core value of their business.

When it comes to the big moments, such as raising finance, or negotiating a trade deal, it is essential to know your real worth. However, putting a price on IP is easier said than done. The sometimes intangible nature of IP makes it complex to define and price, while different valuation techniques can produce differing results. 

With all this in mind, we’ll be hosting two webinars on how to understand the true value of your business and your IP. Our focus will be on those looking to establish a collaborative partnership or those wishing to sell their business: 

IP valuation for collaboration: Seeing the value of your own contribution, 6th October

IP valuation for exit: Reaching the right price for your intangible assets, 13th October

The right valuation approach will depend upon the nature of your business and what you’re hoping to achieve, all of which will be covered in detail by one of the UK’s leading IP consultancies. 

For businesses considering licencing, or even possibly franchising, we are holding a seminar on the 29th September which may also prove of interest.

IP Valuation for licensing: Making your assets work harder, 29th September 

IP for Collaboration 

It is sometimes difficult for a business to “do it all themselves” and as such they look for partners and collaborators. A good collaborative venture can significantly reduce R&D costs and improve time to market. However, there are risks in collaboration, including information leak, loss of control and general ambiguity.

For example, protecting your background IP, i.e.  IP created independently or previously to the collaboration, should be one of your first priorities, as it may be more valuable than any new IP generated by the collaboration. Any ambiguities in the collaboration agreement regarding ownership and exploitation of background IP could derail an otherwise promising partnership and seriously affect other aspects of your business.

Our webinar, IP valuation for collaboration: Seeing the value of your own contribution, will take a deep dive into what a collaborative agreement should look like. Aside from background IP, we’ll also be demystifying terms such as foreground and sideground IP, and premature publication of results, with tips on how to mitigate the associated risks. 

Finally, we’ll take a look at valuation, how to reflect the costs incurred in creating your intangible assets and factoring in a mutually beneficial view on income-generation potential.

IP for Exit 

Whilst COVID has impacted many aspects of business, it has not seemed to affect the M&A market. A recent survey of UK M&A buyers showed that 2020 has seen no drop in appetite for acquisition in the tech sector, with activity high in FinTech, Cloud, Managed Services, HealthTech, CyberSecurity, Artificial Intelligence, Machine Learning and more. 

If you are considering an exit or acquisition, it is essential to understand and leverage the full value of your IP. Your chosen valuation approach will vary and may include a number of factors, such as the costs incurred in creating it, its market potential, comparable deals that may act as a benchmark and its “exclusivity”, i.e. the legal rights you have to prevent others reproducing what you own. 

Our webinar, IP valuation for exit: Reaching the right price for your intangible assets, will explore the broader methods of business valuation, why IP is too often given insufficient consideration, and what happens when someone buys it. We will explain what ‘transfer pricing’ means and how it can help you identify what someone else could do with your assets.

We will also be finding out why corporates don’t routinely just buy the IP from innovative SMEs, and how effective IP valuation can make or break a successful exit.

To hear all this and more, including detailed insights from businesses that have used IP to successfully collaborate and exit, click the links above to sign up to our IP webinars.

 

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