Technology-based intangible assets, such as IP, are central resources for winning in the marketplace. Innovative firms use their IP to support organic growth strategies – creating and protecting income streams. However, inorganic growth strategies through M&A don’t always account for the potential of intangible assets.
The strategic rationale for an acquisition considers synergies in current and future opportunities, and the pricing process accounts for this rationale. Then, integration activities aim to make those synergies a reality, ultimately justifying the purchase price. Unfortunately, high acquisition premiums, derived from overly optimistic expectations, are common and force firms to recognize losses on “goodwill” from these transactions.
Although understanding intangible assets certainly isn’t the only lever to improving M&A success, most firms can improve by viewing the target’s IP assets more strategically. In particular, firms should consider IP:
M&A teams that consider IP and other intangible assets both before and after a deal can improve success with more accurate pricing and more efficient value extraction.