IP Assets Deserve Their Due Diligence in M&A Transactions

Companies believe that IP assets will become more important to overall M&A activity in the next five years.

Just how important is intellectual property (IP) in the mergers and acquisitions process? Both critically and increasingly important, according to results of a survey of 50 corporate executives and private equity practitioners. Indeed, a majority of respondents (52%) to the first M&A Spotlight on Intellectual Property Rights survey report their belief that IP assets will become more important to overall M&A activity in the next five years.

The survey, conducted by mergermarket, also provides the following insights:

  • A large majority of respondents (85% of corporate and 72% of private equity) identify IP assets as equally or more important than other assets when evaluating a target.
  • The highest percentage of respondents (33%) identify patents as the most important IP asset in an M&A transaction.
  • 58% of corporate respondents say insufficient time is the biggest challenge they face when conducting due diligence of IP assets, followed by insufficient resources. For private equity investors, 50% say their primary challenge is the failure to link identified legal issues to the valuation models.

The survey, sponsored by CRA International and K&L Gates LLP, was conducted in the third quarter of 2008.

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