Summary
IP can still be a valuable asset even if a company is in distress or facing the threat of insolvency. Intellectual Property (IP) may be highly relevant to the market in which it is being commercialised, but an outdated business model will drive a company towards financial collapse. For those unable to meet their financial obligations or those recognising that the financial runway is shortening, it is time to seek professional advice and salvage as much value from the IP as possible.
Study
Consider the case of a company that delivered consultancy services to the construction and real estate sector and was in financial difficulty. It owned and had created IP in the form of technical support that underpinned a range of services delivered via a local network of almost 20 satellite offices, which were separate legal entities.
The brand had been in existence for 50 years with its consultancy services dating back a further 50 years. The brand had earned reputational benefit from delivering highly technical, accredited services B2B to both the private and public sector. The Company’s IP, brand and key organisational knowledge, was being licensed and monetized by the satellite offices who were generating recurring income from contractual customer contracts.
The licenses reflected the legacy business and business model and were based on a perpetual royalty free basis. Accordingly, they no longer represented the commercial reality, which was that the services offered by the satellite offices had evolved to meet market demand, generating millions in revenue, and were profitable. However, the head office and technical compliance costs incurred by the Company were increasing and not being covered by its income. The Company had not acted quickly enough and was close to insolvency following which it would lose the opportunity to renegotiate its licenses and save the business. However, its critical IP was clearly still hugely valuable to those satellite offices licensing it.
Outcome
The Restructuring Advisor identified the importance of the licensed IP and the negative ramifications of the Company going into insolvency, which would impact the entire network of service providers. If they didn’t negotiate then they would lose their accreditations and would be unable to deliver their services and their contracts with customers would end. That was enough leverage for the Restructuring Advisor to negotiate new licenses to avoid the interruption to business and save the Company and ultimately the network of service providers in different geographical territories.
The earlier you appoint a Restructuring Advisor/Insolvency Practitioner, the more options will be available. Even in insolvency, valuable IP can be recovered, especially if it is in demand.
