President Donald Trump's policies will create a wave of business acquisitions.
I predict mergers and acquisitions will skyrocket over the next few years. This prediction is based on several factors.
The first is pent-up demand. Under President Joe Biden, M&A slowed considerably, partly due to his executive order calling for greater enforcement of antitrust laws, with the FTC and DOJ following through. There were policy changes and lawsuits, which increased the risk for even normal M&A deals. High interest rates were an added factor, along with the economy in general.
We don't know what Trump will do, but he is historically pro-business and has promised to reduce regulations and taxes. Looking back at his first year in office, M&A activity was the highest for any president in modern history. If interest rates continue to fall, the cost of doing deals will be lower. The risks of doing deals will be reduced if the FTC and DOJ take a different view on challenging deals. Lower taxes will also free up resources.
You need to prepare now
If you're thinking about selling your business, then now is the time to prepare. Like selling your house, you want to make it attractive and take care of issues that may raise concerns in the buyer's mind.
Things that aren't a concern for you may be red flags to a buyer. When we sold our last home, there was a cracked tile on the lanai. It would have been an easy fix, but it didn't concern me. To my surprise, some buyers read the cracked tile as a sign that the lanai was sinking.
Many business owners are guilty of "one cracked tile." This is especially true with intellectual property. Many business owners put IP on the back burner — important but not urgent. Business owners know they have IP; every business has it. However, it is easy to set its protection aside, given other immediate issues that need attention. It is essential to have a system that requires a pause to consider IP and its protection. The system I use with clients takes less than one hour per quarter. It works because it's on the calendar.
Updating your intellectual property portfolio is a key task in selling your business. Every business has IP, but many don't realize its importance. Over the past few decades, the value of IP has soared.
IP is valuable because of what it protects. For example, your business identity is protected by your trademarks. Having well-known and protected trademarks are important to buyers. Trademarks can be your most valuable asset. In one deal, the buyer pointed to my client's trademarks as the reason for buying the business and paying a significant multiple. Customers knew the brand and its reputation. This was a massive benefit to the buyer.
Patents can give the same comfort to a purchaser. Having a strong patent portfolio protects against competition. It's like a moat around your products. Patents can also be licensed to generate additional revenue.
Copyrights protect your creativity, such as marketing materials, websites, images and computer software. A client had all of the images on their website copied by a competitor. We were able to force them to take them down, but if they had been registered, the damages would have been several million dollars.
Your trade secrets protect anything valuable that you keep secret, such as business plans, customer research and processes. They give your business an advantage. Trade secrets are often overlooked, but naming, listing and promoting them demonstrates their value.
What's the cost of ignoring your IP?
To sell your business, your IP portfolio needs to be protected. This gives needed assurances to buyers. Many deals have collapsed when IP wasn't protected.
In one deal, the trademarks weren't registered with the US Patent and Trademark Office. Registration gives specific rights that establish strength. The trademarks likely had value, but the buyer was concerned about their strength and walked away. In another deal, software was important, but there was a question of who owned the software. A third party had developed it, and when the purchaser questioned the ownership, the deal collapsed.
You must inventory your business, identify your IP and protect it. It's time to take your IP off the back burner and fix any issues, even if you're not selling. Don't wait, because protection takes time. Registering your trademarks can take a year or more. You don't want your intellectual property disorganized, unprotected and creating concerns for buyers.
Originally published by Crunchbase News.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
