Tangible assets lost ground the moment governments started to enforce quarantine measures and most workforce moved from glass skyscrapers and office buildings to living rooms, kitchens and bedrooms scattered across the world. The pandemic outbreak has seriously disrupted the global supply chains and businesses across various industries and has put into motion a shift towards a “brave new world” where intangible assets have gained momentum and in which M&A deals are more and more tech centred.
A brave new [M&A] world
Coerced by the circumstances, companies began embracing the digital business model, for once, and that paved the way for the rise of technology-based industries such as cryptocurrencies, artificial intelligence, or robotics, all needing IP protection and all increasing their value through that very IP protection. In that sense, according to a recent study, most businesses have already reviewed their strategies and portfolios, looking to invest into customer-centric digital and technology capabilities, based on which M&A and IP will conversely become a strategic pawn in accelerating growth and development. The same study shows that companies moved from defence mode to a confidence boost, with a staggering percentage planning on international acquisitions in the forthcoming year.
This translated into more opportunities ranging from traditional to non-traditional M&A deals, including cross-sector alliances, co-investments with private equity, deals to secure supply chains, inasmuch as a good amount of disruptive deals to acquire innovative and sustainable technologies, as shown in a Deloitte research. More to that, there is an IP-driven trend that is boosting M&A activity by acquiring new technology and in extenso, intellectual property – from patents, to trademarks, copyrights, design rights, trade secrets and business know-how. Baker McKenzie foresaw that tech and software assets that have proved their endurance during the pandemic will become more valuable.
In that landscape, IP started to play a central role in M&A deals, synchronizing with the changing economic landscape, that has seen a downfall in the first half of 2020, whilst by the second half of 2021, M&A transactions hit an all-time high record with deals of more than US$2.6t, North America and Europe dominating the transactions scene, as per the recent EY analysis. It is expected that by 2022, the M&A activity will be increasingly driven by technology and other innovative capabilities that could long surpass the highs recorded so far, making way for a more intense focus on IP. To showcase that, think of businesses that developed apps and different programs in order to improve life during quarantine, from online schooling platforms to online medical care, shopping tools and so on. Basically, through M&A deals, players ensured a smooth expansion towards new markets, contained competition – if the case may be – and acquired new technologies, that became crucial in today`s economy and social dynamic.
If anything, the pandemic has acted as a catalyst in the digitalization process with more and more businesses looking to find optimate solutions to recover from the economic losses of the pandemic and plan more efficiently for the future. The role and value of IP as a percentage of the market value, and as an M&A asset, is due to further increase in terms of business value, besides securing a higher return of investment or attracting investors. Considering the growing number of tech-oriented businesses, it should be expected a higher need to have an IP strategy while facing the challenges of patent trolls, the growing rates of online piracy and counterfeiting and increasingly developing technology that allows for reverse engineering and the revealing of trade secrets.