April - June 2020Media & Entertainment9Getting a Handle on the Value of Tech Intellectual Propertyedia and entertainment companies naturally prize the intellectual property that is their stock in trade--content such as programming, movies, and recordings. These companies also tend to appreciate and carefully safeguard the intellectual property (IP) they develop for operations, sales and marketing, including contracts, customer lists, proprietary technology and order backlogs.Yet some of these same companies may place too little emphasis on knowing the value of technical tools developed to store, catalogue, manage and deliver their content products. Tech managers sometimes lose sight of the fact that these tools are intellectual property in and of themselves, with value that shouldn't be overlooked. After all, this IP is costly to develop, maintain and upgrade. Programmers and other staffers work thousands of hours to develop platforms and write code to assure the delivery of IP products that may hold more obvious value. It's important for tech managers to take stock in the tech IP they develop or are looking to acquire for these purposes so they can better understand how it might be valued, along with other forms of IP, as a component of their companies' total assets. These valuations may affect views of likely financial outcomes in prospective corporate transactions (mergers and acquisitions), licensing, tax and financial reporting, and infringement disputes. They can help paint a complete picture of how your department's efforts add to the total value of your company. Valuations are a complex undertaking best handled by highly trained professionals with specialized financial backgrounds, and IP can be one the most difficult types of intangible assets to value. Companies undergoing acquisitions or asset sales bring in such specialists, usually from investment banks, valuation firms or accounting firms, as a key step to establish value. Valuations and the methodologies used to conduct them aren't an undertaking for laymen. However, tech managers can benefit their companies by gaining a basic understanding of pertinent elements of valuation methodologies and how they might apply to the fruits of their departments' labors. Even when companies realize the importance of conducting valuations of this IP, they need to be proactive with their legal and financial due diligence processes. Precise, regular and comprehensive valuation of tech IP often involves assessing the impact of various key factors, including:· Projected revenue and cash flow. The more revenue and cash flow that stems from the IP being valued, directly or indirectly, the greater the Brian Marler, Technology/Media/Telecom Group, Houlihan LokeyByMCX O INSIGHTS
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