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Have you taken time to FACTOR intellectual property into corporate finance?

When discussing growth, investment, acquisitions, refinancing or exit strategies with clients, financial advisers routinely explore revenue, profitability, funding and future performance. Yet one area that can have a significant impact on valuation, deal risk and funding options is often overlooked until due diligence begins: intellectual property.

A client may know exactly what their turnover, EBITDA and growth forecasts look like, but can they answer the same questions about the intellectual property that underpins their business? Brands, software, proprietary technology and know-how can represent a substantial proportion of business value and deserve the same scrutiny as financial performance.  IP should routinely be address in corporate financial discussions.

The good news is that financial advisers do not need to be IP specialists to start the conversation. By understanding a few key principles and knowing when to involve an IP professional, you can help clients identify value, reduce risk and strengthen their position before a transaction is on the table.

A simple way to remember the key considerations is to FACTOR intellectual property into every transaction.

F – Funds

Does the IP generate income?

  • Are there licensing or royalty arrangements?
  • How predictable are those revenue streams?
  • How long will they continue?
  • Are key IP rights approaching expiry?

Understanding how IP contributes to cash flow helps determine both value and future earning potential.

A – Advantage

Does the IP provide a sustainable competitive edge?

  • What protects the business from competitors?
  • Is the IP strategy aligned with future growth plans?
  • How long is the advantage likely to last?

Strong IP can justify premium valuations by creating barriers to entry and protecting market position.

C – Collateral

Can the IP support funding?

  • Are rights properly registered and maintained?
  • Is ownership clear and documented?
  • Is the portfolio robust enough to be considered as security?

For many modern businesses, intangible assets represent a substantial proportion of their value.

T – Threats

What risks could impact value?

  • Any historic disputes or ongoing litigation?
  • Are there infringement risks or ownership challenges?
  • Could future claims affect the transaction?

Identifying IP-related risks early can prevent unexpected valuation adjustments later.

O – Ownership

Does the business actually own its IP?

  • Have employees and consultants assigned their rights?
  • Are ownership records accurate and up to date?
  • Are there any gaps in the chain of title?

A valuable IP asset is only as strong as the ownership behind it.

R – Rate

Has the IP been properly valued?

  • When was the last valuation undertaken?
  • What methodology was used?
  • Have commercial circumstances changed since then?

Historic valuations should always be tested against current market realities.

Asking the right questions

Whether your client is seeking investment, raising finance, planning an acquisition or preparing for exit, taking time to FACTOR intellectual property into the conversation can help reveal both value and risk before they become transaction issues.

Download our FACTOR Conversation Guide for a practical framework to help you ask the right questions, identify potential gaps in IP protection or ownership, and support clients as they prepare for their next strategic step; or if you would like to continue the conversation, please contact Rosalyn Newsome.