Business acquisition can be a territory fraught with danger, high risk, and emotion. Often decisions are made with a surprising lack of hard data, based largely on “gut feel” and “synergy”, and little else. Intellectual Property (IP) analysis should play a large role in any business acquisition or merger consideration– in fact, it should be at the forefront of any due diligence activities to establish if the acquisition is even worth pursuing. But before we discuss that, let’s examine some of the fundamental criteria that can help ensure the financial success of an acquisition.
These criteria can be summarized in eight key considerations:
Strategic fit: How well does the target really fit your overall business strategy and goals? Is the acquisition team willfully overlooking some potential negatives because the target has some highly attractive attributes that are just too hard to pass up?
Excess baggage: What else comes with the acquisition? There may be some things attached to the sale that can come back to bite you later on such as conflicting products or services or a technology you may have trouble implementing or finding a place for in your portfolio. Very few acquisitions are clean and simple.
Intellectual capital: Intellectual capital is usually a major part of any business acquisition, especially in technology industries. This capital can take one of two forms: it can be a competency (a set of skills and abilities) or an asset (intellectual property in the form of one or more patents). Each piece of intellectual capital has its own set of potential advantages and disadvantages which thorough analysis can uncover to help you make an informed decision.
Cultural fit: How well employees and management mesh between two formerly separate organizations can be tricky. Is the management approach top down and dictatorial or more inclusive and worker-driven? What about company pride and loyalty? How closely do employee policies of the acquired and the acquiring companies match?
Human resources: What will happen to the employees and management once the target is acquired? Are key personnel being brought over and wooed to stay? Are owners/managers part of the acquisition, how long are they expected to stay, and is there a succession plan in place to deal with departures – planned and unplanned?
Market position: Conventional wisdom says that an acquisition target should be number one or two in its market to sustain significant profits. If an initial evaluation fails to reveal a favorable position in the general market, look closer to see if they dominate a specific niche.
Industry dynamics: Good analytical tools come into play here to help establish a broad picture of the market and technology landscape. Who are the competitors? What does their IP portfolio look like?
Market evolution: Nothing is ever static, especially technology. How will this acquisition affect the industry and the technology landscape? What other companies and technologies are in play that could positively or negatively affect your acquisition further down the road?
The important role of IP analytics in mergers and acquisitions
As we discussed in our previous blog post, analytical tools and rigorous intellectual property analysis play a crucial role in thoroughly vetting any business merger or acquisition. Flexible, sophisticated qualitative analytics are available to quickly, thoroughly, and accurately assess not only individual patents and patent portfolios, but the general patent landscape surrounding a particular technology.
This kind of robust patent analytics can provide insightful answers into IP value and influence -- both of which can significantly affect a merger or acquisition deal -- far faster and more reliably than traditional patent searches and “best guess” analyst opinions.
