When it comes to acquisitions, one of the most vital aspects for would-be buyers to consider in 2025 and beyond is intellectual property (or IP).
Once upon a time this was mostly a secondary concern, but these days IP is now a crucial consideration, especially in our cutting-edge technological era where so many businesses rely on ecommerce platforms to sell a mind-boggling variety of products. These items all need to have an easily identifiable source and identification, to safeguard against potential IP infringement lawsuits.
Similarly, IP is also an increasingly sizable source of value in the world of M&A deals, as it often represents a brand’s unique selling point. Acquirers who fail to understand the importance of IP in acquisitions can open themselves up to all kinds of problems, from possible legal disputes to overvaluing the target or struggling with IP management (in the case of cross-border deals).
To help you prepare for – and hopefully avoid – any serious obstacles regarding the issue of IP in M&A deals, we’ve prepared a list of possible IP problems you may encounter as well as tips on how to avoid them.
1. Confusion over IP ownership
As you approach a potential target for acquisition, there are a range of important factors to consider, but one of those is their IP assets and to what extent they can prove ownership.
After all, if the seller misrepresents how much of their intellectual property they own, this could cause serious legal ramifications for you, post-sale, should the genuine owner decide to seek restitution.
This is where the importance of due diligence cannot be overstated. Of course, there are many reasons to invest in rigorous due diligence but verifying IP provenance is undoubtedly one of them. After all, a brand’s IP is its unique selling point, representing significant value, so you want to make sure you can attain ownership of it outright without any legal battles from disgruntled owners.
But how do you make sure a seller is being upfront about their IP rights? It’s simple – ask them to provide all the relevant documentation, ranging from the individual patents to trademarks, service marks, and representations and warranties. You should also ask them to reveal any current or former disputes regarding IP, to help you gain a clear picture of the legal ramifications of buying their business.
2. Geographical quandaries
If you are purchasing a company ‘across the border’ or if the business you’re buying is in the UK but sells products internationally then IP can become a thorny issue. You need to make sure they have sufficient IP protection in every country they do business in, to protect you against potential problems further down the line.
This is because IP protection typically only extends to the country that has granted it, unless you actively seek protection in other nations where you would like to sell your products.
3. Difficulties with valuation
Determining the genuine value of an acquisition target’s IP can be tricky, for more reasons than one.
For instance, they may have multiple ‘historical’ patents dating back years and years – but only some of those patents may have any authentic revenue-generating value for you now, as a buyer. As a result, you need to consider your plans for your acquisition and where you would like to take your new purchase in the future; this will help you work out which intellectual property is truly valuable to you, and which is less so.
When it comes to calculating the actual value of a prospect’s IP, you may wish to ask an external authority to conduct a valuation, such as a special consultant or an experienced business broker. Being able to gauge the genuine value of a target’s IP is important, to prevent you from either under or over-paying for their business.
4. Failing to carry out a post-sale audit
One potential pitfall you can run into concerning IP is failing to conduct an audit once the acquisition has been completed. While you may not think it necessary, especially if you’ve conducted thorough due diligence, there is still the chance that you might have missed a possible loophole or identification issue that could bring legal trouble down the line.
By investing the time and effort into carrying out an audit post-acquisition, you place yourself in the best possible position to take full advantage of the intellectual property you’ve purchased – with peace of mind.
How a business broker can help
If you have concerns about any aspect of IP during a merger or acquisition, you can ask your business broker for advice, expertise, and nuanced insights. After all, they will have dealt with numerous successful deals involving the transfer of ownership of all kinds of intellectual property, so they can advise you on the right way to proceed.
Not only that, but your business broker can also assist with every other part of the acquisition process – from finding your acquisition target in the first place, to handling negotiations and overseeing that all-important due diligence process.
In a nutshell, hiring a business broker is a savvy step if you want to streamline – and de-stress – your acquisition process.
Harris Acquire – acquisitions made simple
Keen to embark on an acquisition this year? If you’ve found a target with IP that you feel could bring real value to your portfolio then why not allow us to handle the deal on your behalf?
We’ll effortlessly manage every stage of the M&A process from start to finish, saving you plenty of time, effort and hassle – and all while ensuring the utmost professionalism, dedication and confidentiality.
What’s more, you can even take advantage of our exclusive Acquisition Finder Pilot, which includes a 30-day money-back guarantee for your peace of mind.
To find out more about this pilot and about our comprehensive services , don’t hesitate to give us a call on 01926 757100 or send an email to Hello@harrisacquire.com and a member of our friendly and experienced team will be in touch.
