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What Are The Key Aspects of an IP Acquisition?

By: Sandy McMahon

A company's product development effort is moving from a specialty focus to a complete solution encompassing all aspects of the development cycle of its customers. The CEO has identified a potential partner with significant intellectual property (IP) that will help them fulfill this vision. How should the CEO approach this company to access their IP?

Advice from the CEOs:

There are two aspects of any deal: technical feasibility that will produce value; and the emotional needs of the principals. The technical aspects of the deal are the most straightforward and also the easiest to value. More often than not, however, a potentially favorable deal hinges not on the technical feasibility of the combination, but on the wants and desires of the principals and their ability to trust one-another.

A partnership in any form is a lot like a marriage. Compatibility of the principals is essential because there will inevitably be conflicts and each must feel confident in their ability to communicate and resolve differences with the other.

If you are convinced that the combination is technically feasible and will produce significant value to you and other CEO, your task will be to convince him that it is in his and his company's interest to work with you. Once you have sold this concept, you can start to negotiate the specifics. Sell your vision that the value of the combination is considerably more than the value of the stand-alone companies: 1 + 1 = 5!

Similarly, it will be important to establish that even a minority ownership in the combined entity is significantly more valuable than his present ownership position. If control of the technology is an issue, you must negotiate an arrangement so that the other CEO is comfortable with an arrangement in which you are the controlling CEO. One way is to secure the assistance of an individual who is a trusted advisor to both of you, or at least an individual who is highly respected by both. This individual can help to assure the other CEO of your good intentions and integrity. This is particularly important if your objective is to assure not only that you control the resulting entity, but that you retain the productive services of the other CEO.

If your best efforts do not produce an appealing arrangement, your fall-back position may be a limited partnership or joint venture. If this is backed by modest investment with options for future purchase, it may be another way to for you to eventually gain control of the technology. Secure the advice of a good investment banker on the specifics of constructing such an arrangement.

Article Source: http://articles.tiptopweb.info

Sandy McMahon is publisher of Ceo2Ceos (Ceo2Ceos.com), a non-commercial site for executives to share best practices. He is also President of Executive Forums of Silicon Valley. With over 20 years of executive experience, Sandy has a BA from Brown, an EdM from Harvard, and an MBA from Duke.

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What Are The Key Aspects of an IP Acquisition?