How to leverage your intangible assets to raise capital

IP VALUATION:

How to unlock

intangible asset value

to raise capital

PRESENTERS TODAY

*Designed by Layerace - Freepik.com

KIERAN FERGUSON

IP Valuation Analyst

[email protected]

SAJ ALI

IP Valuation Manager

[email protected]

© Metis Partners 2017

WHO ARE WE?

SERVICES

Market leaders specialising in

valuing IP

REACH

Headquarters in Glasgow

Broad presence in Silicon Valley, CA

and London

TEAM

Growing multi-disciplinary team

*Designed by Layerace - Freepik.com© Metis Partners 2017

THIS WEBINAR

2

WHO NEEDS AN IP

VALUATION

1

VALUABLE IP

Poll

3

EQUITY FINANCE

Investment-Based Valuations

Case Study

4

DEBT FINANCE

IP-Backed Finance

Case Study


VALUABLE IP ASSETSPoll

1

2

Software

• Highly valuable

• Can be difficult to secure

1

Patents

• Legal right • Easily identified,

separable and transferable

• All the hallmarks for good collateral

3

Trade Secrets

• Valuable if appropriately documented

• Usually utilised in conjunction with other critical IP assets

4

Brand

• Valuable only if fully registered and protected accordingly


VALUABLE IP ASSETS1

INFORMAL IP

Know-howOrganisational

knowledgeTrade secrets

Proprietary software codeR&D

Brand & reputation

FORMAL IP

PatentsTrade marksDesign rights

Copyrights

OTHER

Any information/data

you would be worried about a member of staff

putting on an USB stick and walking into a competitor

with


2

• Businesses rich in IP, weak balance sheet

• Businesses with strong established brands

• Start-ups/pre-revenue

• Software/tech companies

VALUING IP ASSETS Who needs our IP valuation?


2

M&A IP ASSET TRANSFER

WHY GET AN IP VALUATION?

COMPLIANCE RAISINGFINANCE

EQUITY FINANCE– investment-based valuations

IP-BACKED FINANCE – recognising/valuing IP to secure debt finance


2 INVESTMENT-BASED IP VALUATIONS

• Bridge the gap between book value and

market value

• Up to 80% of a company’s BV is IP

• In 2014 £133bn invested in IP – this value is

“lost” on the balance sheet


3 INVESTMENT-BASED IP VALUATIONS What Do Investors Want?

1

To understand the

ability of the IP to

generate revenue

2

Confidence that the

IP secures

competitive

advantages and

creates barriers to

entry

3

To understand the

quality and the

protection of the IP

assets

4

IP development,

R&D + product

pipeline

5

To understand if the IP will

underpin the scale-up of the

business to meet a growing market demand


3

• Pre-revenue start-up

• Platform for creating and distributing

virtual reality content

• Looking for funding – had zero fixed assets

• Instructed Metis to identify and value all IP

assets

INVESTMENT-BASED IP VALUATIONS Case Study – Introduction


3

Using our Metisology®, we identified all IP

assets that:

• Were critical to revenue generation

• Provided a competitive advantage

• Provided a barrier to entry

Identified not only software, but trade secrets,

databases and organisational knowledge in

relation to documented procedures and

processes

INVESTMENT-BASED IP VALUATIONS Case Study – Our Approach


3

• Mapped IP assets to revenue

• Provided detailed narrative on the quality

of the IP

• Compared client’s IP with comparable

licence agreements to determine a market-

based royalty rate

• Fully narrated our methodology

INVESTMENT-BASED IP VALUATIONS Case Study – Our Approach Continued


3

• Valued critical IP assets at circa £8m

• IP valuation report highlighted Company’s

true value for investors

• Secured investment based on BV which

mirrored the value of the IP assets (£8m)

INVESTMENT-BASED IP VALUATIONS Case Study – Outcome


4 IP-BACKED FINANCE

• IP backed finance is hugely important for

SMEs

• Finance can be based on the strength and

quality of the IP

• Using IP as collateral can improve lending

conditions

• Different forms: IP-backed loans, sale and

leaseback, pension-led finance, IP-backed

securitisation


4 IP-BACKED FINANCEHere Are Some Of The Deals We Worked On


LENDING-BASED IP VALUATIONSWhat do Lenders want?

2

Confidence in the

recoverable value

of the IP

1

To understand

the value of the

collateral – an

independent

view

3

A clear market

demand/secondary

market for the IP

4

4

To know the

collateral is

protected,

secured and

transferable


4

• Well known musical instrument brand

• Already heavily indebted

• Needed working capital to unlock its order

book

• Instructed Metis to assess the situation and

offer solutions

LENDING-BASED IP VALUATIONSCase Study – Introduction


4

• Market research identified previous M&As

within the sector

• Identified the Company’s brand as the most

valuable IP asset, valued at £250k

• Our solution – transfer of the IP and debt to

an IPCo

LENDING-BASED IP VALUATIONSCase Study – Our Approach


4

• Everyone accepted the new structure

• Brand used as collateral against the debt

• Royalty revenues received by IPCo secured

to satisfy debt obligation

• Trading Co able to re-finance

LENDING-BASED IP VALUATIONSCase Study – Outcome


5 KEY TAKEAWAYS

1 2 3 4 5Don’t discount

the value of your formal and

informal IP

Understanding and

communicating your IP to

investors can help raise your

business valuation

Investors want to know the IP

is well protected, robust and underpins

scalability and revenue growth

In the right circumstances,

lenders can find IP just as

valuable, if not more valuable, than physical

assets.

Lenders want to know if

they can take security and control over IP assets and

have confidence a

secondary market exists


THANK YOU!

We are available to discuss any of your IP

needs in more detail, so please get in touch!

Kieran Ferguson [email protected]

or

Saj Ali

[email protected]

0141 353 3011

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How to leverage your intangible assets to raise capital

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