The Role Of Intellectual Property In Merger, Acquisition Process
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The Role Of Intellectual Property In Merger, Acquisition Process

In the recent time intangible assets of companies are becoming prominent in financial statement.

John student former CEO of Quaker Oats Company once said “If this business were split up, I would give you the land and bricks and mortar, and I would take the brands and trademarks, and I would fare better than you”.

The above statement suggests that the engine or the power of Quaker Oats Company is the brand and trademark.

Merger and Acquisition is the amalgamation of interest of more companies in other to be financially stable or dominate the market, which can be vertical integration, horizontal integration and conglomerate merger.

This does happen for number of reasons, size, risk reduction, limit competition, financial synergy, growth, management etc and when this happens both the assets and liability are combined.

Intellectual property has attained an extremely important status within the fabric of society and livelihood.

Some enterprises, and even whole industries, are built on an intellectual property foundation. Dependency on intellectual property in businesses and careers a significant percentage of the population dwells on creating and maintaining intellectual property.

The society is being entertained by it, educated by it, communicate with it, and are made and kept healthy by intellectual property (World Intellectual Property Organisation, 2019).

Thammaiah and Narahari earlier stated that Intellectual Property is a means for technological and economic growth that has been realized globally, especially in the developing nations.

Binder and Nestler corroborate the earlier view of Ocean Tomo (2015) that Intellectual Property represents 80 percentage of the corporate value.

By this, intangible assets account for an average of 80 per cent of enterprise value, which 50 years ago was in the area of 25 per cent.

In parallel with the structure of assets and value drivers, the sources of profit have changed over time. Profits generated by intangibles assets increased at the 80 per cent.

Today, by implication, an average of 80 per cent of profits comes from intangibles assets (intellectual Property) Binder and Nestler (2016).

Marsh and Mclennan Company (2014) stated that, the initial public offerings, high-profile mergers and acquisitions and litigation has thrust intellectual property (IP) into a strategic position in the global economics. The due recognition of IP will help in determining the optimal structure and character of the business deal.

The type of company or business IP ranges from copyright, trademark, patent, design, trade secret and combination of these makes a business to flourish and ability to compete in their various sectors, every sector has its peculiar IP, including the staff.

All these are to be put into consideration wherever companies are coming together as one.

For parties to be comfortable at the point of negotiation, it is advisable they possess business valuation report, which includes intangible assets, which would have analyzed the financial healthy nature of the company.

This requires a deeper understanding of the valuation methodologies.

The interest of parties would have been x-rayed in the valuation report; the strength and weakness of the parties would be glaringly seen.

Therefore, the economic value of Intellectual Property assets is very important in considering any merger and acquisition.

In other word, companies should protect their IP portfolio jealously. A smart investor will make you to forget your IP, which will in turn be the life wire of the new marriage.

There are products that have turned to be household name. In fact, one would have mentioned the name and the retailer would have asked what type?

Meanwhile it is a product’s name, such going into Merger has a good trademark to negotiate with, because he has dominated the market already.

The present and future value of IP value is very important and therefore, all financial team should take good cognize of Intellectual Property Rights, when it comes to dealing with M&A transactions.

In Nigeria, those who are trained, qualified and experienced to undertake such task are the registered estate surveyors and valuers.

– Daily Independent