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23 June 2014Patents

IP acquisition a “catalyst” for cross-border takeovers

The potential of acquiring lucrative IP assets acted as a “catalyst” in a quarter of cross-border mergers and takeover deals last year, a report has revealed.

The report, Going global: strategy and execution in cross-border M&A (mergers and acquisitions), examines the motives for deals worldwide.

It said that a quarter of all deals secured in 2013 were motivated by a desire to acquire a company’s IP assets.

IP came just behind access to customers as the leading driver of M&A, which was identified as the most important reason for acquisition at 34 percent, but ahead of access to industrial assets at 21 percent.

The Baker & McKenzie LLP report, released today, June 23, surveyed more than 300 senior executives who had recently completed cross-border M&A deals.

IP executives were motivated by a split between patents and technology at 56 per cent, and brands and trademarks at 44 per cent.

However, despite more than 80 percent hailing their last M&A transactions as a success, 33 percent of respondents identified complex IP ownership structures as the biggest due diligence challenge.

Pamela Church, partner in the New-York office of Baker & McKenzie, said takeovers were not as straightforward as “simply checking” that the target has IP.

“Usually, complex products include a mix of owned IP and IP licensed from a third party,” Church said.

“When acquiring a target, the bidder may believe that they are acquiring all the IP; however it may be necessary to renegotiate with one or more third parties because the product is inextricably linked to the licensed property.

“It’s crucial to make resolving these issues a condition of closing the deal – sometimes the pricing may even be affected if, for example, renegotiating licenses results in higher royalty payments.”

The report added that companies would need to ensure they consolidate and protect IP rights post acquisition.

“Companies frequently assume the law is global. So once they’ve registered a copyright in their own market, they can use it around the world,” said Harry Small, partner and head of the firm’s global technology practice group.

“Unfortunately, that’s just not true," Small added.

The report was based on research by market research company FT Remark and Mergermarket which combined with Baker & McKenzie.

Founded in 1949, Baker & McKenzie has more than 6,000 staff in 75 offices in 47 countries.

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