Whether a company acquires intellectual property (IP) assets alone or outright merges with a target company, its underlying intellectual property can dramatically affect the price of the acquisition. For instances in which the IP is the driving force for the merger, the importance and need for adequate diligence on the assets becomes even more important. From a buyer’s perspective, there are obvious needs in analyzing assets (ownership, current status, intended use), as well as underlying factors (foreign protection, term, pendency). Each of these can have a material effect on a negotiation, and a buyer should seek to uncover all identifiable factors before acquisition to understand exactly what it is buying.
As part of a due diligence analysis on a target company, an acquiring entity has many factors to take into account, with some playing a more significant role in a negotiation than others. A proper due diligence analysis should focus on a target company’s patents and other IP assets for sure. But the impact of a target company’s IP can be much greater and an acquisition negotiation can be driven by other factors, such as a target company’s licenses of IP to other third party companies, as well as a target company’s use of third party IP in its own products and/or services.