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Creations of the mind © Metis Partners 2012 1 © Metis Partners 2011 2 IP assets under the skin of every business – need to look for them……… … to understand what you have and don’t have compare to competitors © Metis Partners 2012 3 5 © Metis Partners 2011 6 IP Monetisation alternatives • Universities / Inventors: commercialisation platforms • Large Co : IP sale & leaseback - Ocean Tomo Europe Out-licensing into non-competing markets Outright IP sale IP (patents) assertion • SME: © Metis Partners 2011 min £1m turnover – Metis way!! 7 Patents & software Competitive Advantage WHY else? ... recovery £££ value in selling IP assets Brands – always UNDERVALUED! Patents UK & Community trade marks / designs Customer databases (sold and valued) Software products Software systems Process (manufacturing) information Know-how (and negative know-how) R&D and tax credits © Metis Partners 2012 IP valuation ….. like men vs women ........we all see things differently! © Metis Partners 2011 10 VALUATION – Funders TRUST “in situ” valuation ...WHY? • Not “black box” hypothetical valuation • Linked to current turnover / revenues of business • Relies on a “rating” of IP assets • Incorporates distressed / insolvency sale value £ • reasonable royalty rate based on IP asset rating – high vs low © Metis Partners 2011 11 IP Asset value indicators – funders • Low Value – Recognition of critical know-how in business • Low Value – unregistered TM/logo use • Medium Value – protection of key know-how /TS behind competitive advantage • Medium Value – TM’s ® & awards and broadened reputation • High Value – JVs / collaboration , sharing know-how e.g manufacturing case study • High Value – expanding online or into new markets / channels e.g. musical instrument case study © Metis Partners 2011 12 IP Asset value indicators (2) – funders • Low Value – patents, software, TM’s ® • Low Value – image enhancing customers • Medium Value – key patents & software protection • Medium Value – customer loyalty & stickiness • High Value – out-licensing non core • High Value – customer & IP assertion / infringement reliance or tribal knowledge to / from customers e.g. restaurant case study e.g recruitment case study © Metis Partners 2011 13 © Metis Partners 2011 14 £1m t/o business Balance sheet Trade Co £000 PPE 215 Current assets 50 Total assets 265 Equity & liabilities Total equity 245 Current liabilities 20 Total equity & liabilities 265 © Metis Partners 2010 Off B/S IP assets – brand, patents, software etc. IP asset rating – royalty rate 9% IP valuation “transaction price” £150k Balance sheet NEW IPCo £000 Intangible assets 150 Current assets 20 Total assets 170 Equity & liabilities Total equity 150 Current liabilities 20 Total equity & liabilities 170 15 £1m t/o - transaction IP valuation £150k Balance sheet £000 PPE Balance sheet Trade Co 200 IP valuation “transaction price” £150k IPCo £000 Intangible assets 150 Current assets 50 Current assets 20 Total assets 265 Total assets 170 Equity & liabilities Total equity 245 Current liabilities 20 Total equity & liabilities 265 © Metis Partners 2010 Equity & liabilities On B/S IP asset security for funders Total equity 150 Current liabilities 20 Total equity & liabilities 170 16 New IP asset cashflow valuation £300k Balance sheet Trading Co £000 PPE 215 Current assets (incl. new IP debtor OR cash) 200 Total assets 415 Equity & liabilities Total equity 395 Current liabilities 20 Total equity & liabilities © Metis Partners 2012 415 IP asset rating / value improvement work – 13%Balance royalty sheet rate IP Licence – bank lend against 2.5 times annual (royalty) revenues £130k pa x 2.5 =assets £300k Intangible NOT against Current assets transaction valuation £150k Total assets NEW IPCo £000 150 20 170 Equity & liabilities Total equity 150 Current liabilities 20 Total equity & liabilities 170 17 Bank / Investor benefits Benefits Security over critical IP assets now on B/S of IPCo Visibility of dedicated cash flow to repay debt Company focus on cash flow value of IP assets Attract private investors/partners Observations Identify IP assets considered critical to the business IP often not secured nor valued by bank / investors Intangibles can be worth as much or more than trading business Identify buyers for IP assets in advance – M&A / competitors / partners / customers © Metis Partners 2012 Restructuring options – bank benefits New & improved security – more control over business/management Hive off – no shadow director issues for bank Conditions precedent & subsequent – bank have REAL influence IP asset package & disposal - neat and quick (weeks not months) Enhanced recovery – accelerated disposal / pre-insolvency Stephen Robertson [email protected] Tel: (+44) 0141 353 3011 www.metispartners.co.uk @metispartners © Metis Partners 2012 19