M&A Deals: IP Shifts to the Center
During the panel discussion CT03 IP Representations and Related Provisions in M&A Transactions, Aaron Hendelman (Wilson Sonsini Goodrich & Rosati, USA) said that 20 years ago, IP in mergers and acquisitions (M&A) was often more of an afterthought, and that not every transaction would have a meaningful IP component.
But the world has changed. “There really is no deal that doesn’t have deep, serious IP issues in it,”Mr. Hendelman said.
Types of IP assets in M&A transactions include company IP, such as trademarks, copyrights and patents, and also third-party IP licensed to the company, such as brand licenses, software or patent licenses, explained Kristin Stammer (Herbert Smith Freehills, Australia).
Handling the IP component in an M&A deal is not always straightforward, however.
The IP issues in a given transaction will differ based on the form of the transaction, be it a stock share purchase, a merger, or an asset purchase.
The type of transaction will determine the need for IP warranties and may involve change of control issues in case of a share purchase, for example. In addition to that, an asset purchase requires appropriate definitions of transferred IP, licenses, and IP assignment agreements.
However, warranties “are not a substitute for proper due diligence,”Nemone Franks (Linklaters LLP, UK) stressed. “Warranties should be seen as an addition, not as an alternative to proper due diligence.”
Ms. Franks pointed to the importance of disclosures for the design of warranties because a seller will not be liable to the buyer for any facts that it has fairly disclosed to the buyer, she noted.
“The key point to bear in mind when you are acting for a seller is to make sure that your disclosures contain only specific, known facts,”Ms Franks said. “When you are acting for a buyer, the key thing to do is to knock out any disclosures which are not specific or are unfair,”she added.
Jeremy Roe (Anheuser-Busch InBev Services, USA) noted that it is important that the IP team is part of the deal team to help assess the deal value. IP lawyers are essential to determine the value of the IP rights being acquired and the risks involved, he suggested.
There is a tendency for an IP lawyer to have merely a support role and to come in at a later stage when problems have been identified, Mr. Roe said. “What I’d like to see is the IP lawyer being part of the initial deal team from day one.”
Later involvement of the IP lawyer can result in negative surprises and lead to a different type of deal structure financially, difficult negotiations, or even cause the deal to fall apart, he concluded.
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