Due Diligence Must Include an Intellectual Property Review

When two businesses come together and agree to an acquisition or merger, the next steps are crucial. You’ve both done significant legwork to get to this point – but much work remains. Even if you’ve already signed a term sheet and/or letter of intent, the due diligence phase of this process can alter the deal significantly.

What we’ve found when dealing with mergers and acquisitions in the past is businesses often neglect to do a thorough review of the other company’s intellectual property portfolio. Let’s dive deeper into how this could unlock hidden value and ensure your deal allows you to thrive in the future.

What is Due Diligence?

If you’re in business, you likely already understand this aspect of all major business deals. Due diligence is similar to the final inspection before the purchase of a house. The buyer will take an extensive investigative review of the business to ensure the other business holds the value being claimed.

Due diligence can include thorough details such as looking at financial books, reviewing operations and systems, reviewing employees and their roles and contracts, and a review of assets. Our firm has talked extensively about the hidden value in intellectual property and how these holdings are valuable assets that impact the value of a business.

Reviewing Intellectual Property Strategy During Due Diligence

So, what should you be looking for when you gain access to the other company’s intellectual property filings? Your investigation should answer a handful of questions:

  • What intellectual property is actively held?
  • Are they owned by the business (and thus included in the deal)?
  • Are they being properly maintained?
  • How will the intellectual property being acquired boost your business and its goals?

A failure to investigate intellectual property may expose you to some surprises at the end of the process. Some companies haven’t secured protection for their own business name, let alone securing protection for best practices and innovations. If the brand you’re buying claims to hold great value then that value will need to be protected from infringement.

Don’t Buy a Lawsuit

A company that does not have a thorough intellectual property strategy is a lawsuit waiting to happen. If you buy a company that has not acquired or maintained intellectual property protections then you may be buying a company on the verge of litigation.

The flip side to this is that you may be uncovering some hidden value in the business if there is a lack of intellectual property protections. Tread carefully on this, however, because you’ll need to act quickly to protect your acquisition.

Whether you need an experienced attorney to review the IP strategy of another company or want to set yourself up to quickly register IP protections after an acquisition, CLARK.LAW can help. Our team is driven by data and understands the needs of growing businesses looking to the future. Contact us and get ahead of the future of business law.

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