Managing IP Rights in Mergers & Acquisitions
Economic turbulence and market disruption often lead to increased merger and acquisition activity. As businesses struggle to survive, they can become attractive to more stable businesses looking to expand their influence. Similarly, businesses may see the strategic advantage in combining to share risk, and hopefully reward, in a difficult climate. While 2022 was a quieter year in global M&A terms, consultancies such as McKinsey are seeing signs of optimism and predicting an uptick in activity in the second half of 2023.
When a merger or acquisition is on the cards, every asset of the businesses involved must be identified and valued, from its bricks and mortar buildings to the intangible assets that regularly carry a higher value than tangible ones. Indeed, in today’s virtual, digital, mobile-focused world, the value of a brand – especially in the B2C space – can far outstrip that of the company’s physical assets.
As a result, we are seeing the phenomenon of a company acquiring the intangible and virtual assets belonging to a brand without acquiring its physical assets at all. In late 2020, UK High Street department store Debenhams went into liquidation. Its brand and website were purchased by online retail specialist boohoo.com for £55 million, but its stores were not part of the deal. This is a common strategy from boohoo.com, which snapped up fashion brands Coast and Karen Millen in August 2019, and added the intellectual property of Oasis and Warehouse to its portfolio in mid-2020. Fashion retailer Next has also followed the trend, acquiring the IP and selected physical assets of Joules and Made.com, while in the US Authentic Brands group has been on something of an IP acquisition spree, adding UK countryside brand Hunter and surf brand Quicksilver to its portfolio in recent months.
Clearly, in this environment, intellectual property rights and ownership are central to the terms of the deal, and it’s essential that brands have maintained good hygiene around their rights when it comes to accurately valuing them.
Pre-deal due diligence: keeping intellectual property records in shape for M&A
Mergers and acquisitions often come about rapidly and under conditions of secrecy. This can put a lot of pressure on in-house legal teams as they participate in the rigorous due diligence processes needed to get a deal over the line.
Accurately identifying and validating the different rights owned by the business is an essential part of determining their value. It also helps avoid any nasty surprises later in the merger or acquisition process. If it transpires that a trade mark registration has not been properly maintained, or that its ownership is not clearcut or is in dispute, the value of the brand can be affected. The same is true of the classes and jurisdictions in which the trade mark is registered – if these don’t accurately reflect the areas (both geographical and commercial) that business operates in, the value of the trade mark is diminished.
It is also important to provide evidence of the brand protection activities undertaken by the business, and any infringement cases in progress (both for and against the business) as this could affect the IP valuation.
When it comes to identifying and valuing the intellectual property assets owned by the business the spotlight will swing squarely onto record-keeping in relation to the company’s registered trade marks, designs, and domain names. Being able to produce a report detailing the existence, ownership, and registration status of the business’s IP assets quickly and accurately is essential when valuation activity is under way.
An IP portfolio management system is a crucial tool for tracking and reporting on the status of the IP rights owned by a business, and any matters relating to them. A good system should be capable of linking rights records to all aspects of their management including agreements, assignments, consents, disputes and licenses. In the case of multiple brands and sub-brands, it should be able to create links so all IP belonging to a particular category can be easily found and reported on. WebTMS clients enjoy the use of a purpose-built Assignments module, which includes a built-in Chain of Title section, electronic document storage capabilities and the option to add reminders and deadlines to keep track of the formalities at the relevant register.
Post-deal integration: merging and updating IP records
Once the ink has dried on the deal, the newly merged or acquired business must undergo a process of integration. The clock will be ticking, because the faster the business integrates, the quicker it can begin to realise the anticipated benefits that drove the deal in the first place.
For in-house legal teams this is likely to mean the merging of IP records so that there is a single, central, source of truth regarding the brand management position of the new business.
In the past, this may have entailed a significant manual data entry exercise to transfer record data from one system to another. However, WebTMS customers are in a good position today with the ability to import intellectual property records from more than 180 online trade mark jurisdictions with just a few clicks to create full trade mark records.
This can be done on a per-record basis if you know the application number and country, or you can import multiple records at once by searching on fields such as owner, agent, trade mark, and more. This is an excellent tool to support mergers and acquisitions when you want to add all the marks in the new portfolio swiftly, with trusted data.
Also critical to the future success of the new organisation is the process of updating ownership details with the relevant registries, so the new entity is recorded as the owner of the existing rights (in the case of a merger) or rights ownership is transferred to the acquiring organisation (in the case of acquisition). Once this has been completed, updating in-house records is straightforward when using the purpose-built Assignments Module in WebTMS. At a click of a button, all associated records can be batch updated to the new owner’s details as soon as the confirmation from the registry is in hand, creating that Chain of Title entry in the record. Or you could take it one step further in automation with WebTMS’ DataSync function, which will automatically synchronise your records with the most up-to-date information from our third party data sources, and create an audit trail on each trade mark record.
Well-managed IP records lock-in M&A value
A merger or acquisition is a pivotal moment in the history of any business. By maintaining accurate and well-managed IP rights records, a business puts itself in the best position to achieve an accurate valuation of its intangible assets, so it is ready to capitalise on M&A activity and succeed in the future.
To learn more about how WebTMS can support your business in managing its IP records, contact our friendly sales team on [email protected].