IP As Debt Collateral

Tue, 7/16/2013 - 2:00PM — STRATEGIC ANALYTICS

In some instances, understanding the importance of the IP portfolio to the operations and assets of the company that owns the IP could be an important first step. For example, if a company owns IP assets that cover technologies that are key to the operations of the business, holding this IP as collateral could offer significant leverage in a liquidity event if the going concern is worth more than the IP collateralized loan.

However, understanding the importance of the rights protected in an IP portfolio separate from the operations and business of the borrowing company should the company fail is an important due diligence step for transactions of these type. An analysis of the potential liquidation value of these assets should consider patent quality, technology coverage, encumbrances, expiration dates of key assets and the positioning of the portfolio compared to other key player patenting in the same technology space.

In many situations, a company’s IP portfolio contains the most important and valuable assets to the company as a going concern. However, a close examination of the market value of the assets should the company fail could provide the key to unlocking potentially untapped tools for optimizing capital structure.

 

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