Whether you like it or not Antiques Roadshow is a hard show to channel surf past. There’s something strangely compelling about someone finding a priceless painting in their attic or stuffed behind the water heater.
Before you start ripping up the floorboards many management teams might be better dusting off past R&D efforts to see if they own valuable intangible assets that are currently lost off the balance sheet. These include code, data, brand, know-how, trade secrets, etc.
In the past years US has seen at least six intellectual property transactions of a billion dollars or more. Aging or distressed companies such as Kodak, Nortel and Motorola Mobility have realised that intellectual property can have enormous value. In Nortel’s case the sale of its patent portfolio netted the beleaguered company US4.5 billion, effectively valuing it at three times the rest of the company (roughly US$750,000 per patent). In August 2011 Google acquired Motorola’s Mobility business unit (after reporting 5 straight quarters of losses) for US$12.5 billion, a move motivated almost entirely by Motorola’s treasure trove of 17,000 patents.
You could say that this is the stuff of fairy tales but like the proverbial retiree from Swansea with her 16th century Charles II tea set it actually does happen. In fact there’s a whole book about it, called fittingly “Rembrandts in the Attic” by Kevin Rivette and Davie Kline. It charts how companies (and individuals) can own intangible assets (not just patents but trademarks, copyrights and confidential information) that are extremely valuable but they are often unaware of their existence, let alone true value.
One of the best examples of this phenomenon comes, in fact from New Zealand. In the early 2000’s a little known New Zealand software company developed what would come to be an industry changing technology. It filed a patent application over the area and attempted to commercialise the technology but for a variety of reasons (not the least of which that it was simply too early) it was unsuccessful. Management kept the patent application alive and it was eventually granted. At this stage they approached EverEdge and over a four month period we negotiated the sale of the patent for an eight figure sum (tens of millions of US$). The sale marked the highest price ever paid for a single US patent. The company netted $45 for every $1 invested into it. That’s a venture capital type return for a company that had otherwise stalled.
Companies with a knack for out of the box thinking (which tends to produce early, and therefore more valuable intangible assets) are well positioned to take advantage of the increasingly liquid market in intellectual property. This includes not just start ups and back yard inventors but also medium and large corporates who often have little awareness of potential unrealised value sitting on or off the balance sheet. The irony is that many of these companies record low value items such as chairs, desks and laptops in their Fixed Asset Register but fail to identify assets that are potentially far more valuable – the intellectual property derived from R&D, innovation activities or ideas from the bright minds of staff or contractors.
However the mood is changing. Smart management teams have come to realise that many businesses do produce intellectual property and that while these assets can be highly valuable they need to take proactive steps to extract that value. We are currently acting for a number of companies selling highly valuable intellectual property derived from previous R&D and innovation efforts which fell outside of core business or that shareholders and management were initially unaware of.
It’s worth noting also that national governments, typically one of the largest investors in R&D, tend to have more than their fair share of Rembrandts gathering dust in its Attic. Getting them out of the Attic is whole other story however.
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