Intellectual property assets are being increasingly leveraged as a negotiating tool in mergers & acquisitions (M&A) but businesses should be careful they do not fall foul of competition law, an international firm’s annual bellwether has suggested.
According to the 2018 M&A trends report, produced by magic circle firm Clifford Chance, the rise of ‘data as an asset class’ means that some of the ‘most exciting’ deals today involve IP-rich businesses. However, the report warns that regulators are ’increasingly viewing IP and data-focused M&A deals with suspicion’ and that lawyers should ensure IP ownership is clear before companies try and reach a deal.
The report says antitrust (competition) regulators are beginning to show their teeth and a greater interest in smaller IP-driven deals when they have been ’historically permissive’.
The report analyses Uber’s acquisition of Otto, a startup specialising in technology for self-driving trucks.
Otto’s main founder, Anthony Levandowski, was a former engineer at Waymo, another autonomous driving company. Waymo alleged that Levandowski had misappropriated its IP and trade secrets and implemented that technology at Otto. The company subsequently sued Uber for infringement and ‘calculated theft’ of its self-driving technology but the case was settled in February last year for $245m (£189m).
‘Where prior ownership has made title to the IP unclear, obtain confirmatory assignments or protection before completing the deal,’ the report suggests. It adds: ’Gather evidence early to counter potential objections, e.g. to show that the parties’ data is replicable and non-unique and that the deal will not lead to anticompetitive withholding or bundling of IP. Where appropriate, develop tailored remedies that address concerns with minimum business disruption, e.g. access, interoperability or non-assertion commitments.’
Ling Ho, IP partner at Clifford Chance, said: ‘We are seeing more tactical ways of mobilising IP to engineer, structure and control a deal. Putting pressure on a business to get and test the best price, or take pole position in a competitive sale, can be a highly effective strategy.’
Overall there has been a slight drop (3%) in the number of deals completed in 2018 (around 16,000) compared with 2017. However, the global value of deals increased by 12% to $3.5tn (£2.7tn).
According to the report, cross border M&As comprised 38% of the total. The largest cross-regional M&A investment flows in 2018 were from North America into Europe – worth $238bn (£183bn) and Asia-Pacific into Europe – worth $213bn (£164bn).