Form and Function of Licensing Deals

Dec02
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3318748484_9ff7e56362_oLicensing agreements are ubiquitous; from computer software to Dora the Explorer party favors, many products and services are brought to market through licensing agreements. Put simply, the holder of a patent, trademark, process or other intellectual property (the licensor) allows another (the licensee) use of the IP for commercial gain.

Whether the agreement is arrived at over a few beers at the pub, or is complex enough to involve teams of lawyers and accountants, the basic form remains the same, spelling out the rights and responsibilities of each party to the deal.

Profit is the goal of licensing deal, how that profit is divided is an important part of the agreement. Generally the licensor will receive a minimum payment at a set time as well as royalties based on sales. Royalties typically are in the 6-10% range. Compensation clauses may also require a minimum revenue requirement, which if not met allows the grantor of the license to end the relationship.

The time frame of the agreement is also important. More than just the duration of the contract is involved. The time frame mandates when the licensee must have the product or service on the market. To aid the licensee during the initial phases of development this part of the contract usually allows for a delay in initial payment to the grantor of the license. This part of the agreement also covers renewal and termination conditions.

The operational element of the contract involves quality. It is not uncommon for the grantor to require the licensor to adhere to the parent company’s policies and procedures involving development and marketing of new products. This section also covers distribution territories, non-competing covenants and ownership and control of assets involved in the agreement at its conclusion.

Putting your valuable Intellectual property in the hands of another is a decision that should not be entered into lightly, proprietary information and your good name is on the line.

Smart Strategy Behind Twitter’s Newest Acquisition?

Nov06
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271_1310601711Why would a company want to pay $350 million to acquire a company that has reported less than $10 million in revenue? According to a recent article in the New York Times’ Deal Book, Twitter had some very good reasons for wanting to buy the advertising technology company, MoPub. More importantly, though, is that it provides Twitter with the ability to bring even more to the technology table.  MoPub provides mobile publishers with a hosted ad platform.  The services it offers are a real-time ad exchange and a service that pairs advertisers with app developers who can place ads within programs. This focus is one that can open up a whole new revenue stream for Twitter.

The twitter management team sees the acquisition providing a windfall of future cash flows and is also a defensive move such that Twitter can now manage the MoPub solution solely for its own benefit.

The soon to be public Twitter is hoping the $300+ million price tag was worth the investment.  In time, observers can pass their own judgment on the merits of the deal as Twitter begins to publish its financial results after it goes public.

Successful Acquisitions Are About Relationships, and So Much More

Oct25
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HeadAndTheHeart-byDylanPriest2Business newspapers are part of your daily breakfast routine. Your senior team members research acquisition prospects. You have capital to grow your company. You create The List – emerging technology companies which are likely to be successful acquisition prospects.

You attend tradeshows and invest time in networking with the leaders of companies on The List. Since you are in the high tech industry, you even post your acquisition strategy on your website, like Dell (see their website).

Meanwhile, successful emerging technology companies that fill a niche in your world are thinking strategically and long-term about the sustainability and survival of their product. Along with other options, acquisition is on the table. With available capital and a bit of courting and charm, you could be the one who convinces the right company to allow you to acquire them.

Knocking on the door of the right start-up, your company offers a compatible corporate culture, capitalization, and the chance for the new product to survive and, indeed, thrive. Two other attractive potential acquisition partners offer competitive packages.

But you have spent the most time talking to the CEOs. One in particular demonstrates enthusiasm and compatibility. Your own enthusiasm for acquiring this company grows.

Acquisitive companies have a replicable strategy for future investment and growth. Like Intuit, you may end up acquiring several exciting new companies and that company’s talent. Just this year alone, Intuit has acquired five acquisitions, and a team of talent with each one. It’s latest acquisition, Level Up Analytics, brought with it a “rock star group” of 14 employees.

From strategic and financial reviews of your target company to integration execution and leadership, companies need to develop and sustain relationships cross-company while at the same time delving into the analytic details that translate into a successful acquisition.

While relationship building with potential acquisitions is often the difference between getting the deal done, the less glamorous details such as resolving power struggles, paying too much, poor acquisition integration, and other pitfalls will derail your acquisition.  Acquisitions are costly and failures even costlier, both in terms of dollars and reputation.

Building Your Dream Team Board of Directors

Sep30
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MG_0021-flat-blk-screens-2As an entrepreneur, there are many vital decisions you face that dramatically impact the way you do business. One of the most important determinations you will make on your company’s corporate development relies on establishing a solid board of directors. After the board has been assembled, you must work with them toward your common goal of success; therefore, it is important to choose your members wisely.

Execution and growth issues can be the toughest endeavors for a budding company to face. An experienced and aggressive board will help put these situations in perspective; offering a multitude of possible solutions and strategies to conquer these affairs. Through prudent governance, a board of directors should oversee issues that may arise with prospective hires, partners, investors, and customers.

As an entrepreneur you need a board to which you can entrust important duties such as assembling your management team. These individuals will face the day to day operations involving employees, vendors, and customers. The board needs a strong grasp on what type of management team is needed and where to allocate these leaders for the most proficient and efficient results. Each department should be a balanced, smooth operating entity.

The board should be a key element of company development. The shrewd governance of the board should be able to guide the company through its multiple stages of growth; consistently reorganizing and re-strategizing based on the monitoring of overall company health and performance.

When setting out to create your board, be mindful of these simple tips:

  • Make a list of what specific expertise you need. Find individuals who will work well together and have a synergistic skills; this is critical when forming a cooperative and powerful board.
  • Seek out individuals who know your business well and may have started companies from the ground up. You also want these individuals to possess excellent networking skills or may already be connected to other key players in your field.
  • Employ members who bring focused expertise to the group, will participate in strategic planning and execution, but will leave the day to day operations to the CEO and the management team.

Corporate Development Timing

Aug05
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moonmanIt sounds obvious: every corporation is always seeking ways of further developing its business model. Those who are able to prioritize those efforts in an uncertain economy are the ones who leave a formidable mark not only on the industry in which they dominate, but the business and financial sectors as a whole. Of course, economies ebb and flow, but it’s about weathering those natural shifts. The only certainty? The fact that nothing is ever certain. What worked in 2008 may be the worst possible scenario for 2013. It’s about timing and bringing a corporate development effort full circle when the moment is right.

The challenges are different for each business; markets shift and risks emerge and evolve. Even today’s tax dynamics would be unrecognizable to the CEO of yesterday. While it’s absolutely crucial that corporate development first protect the corporation, questions about social responsibility, the environment and transparent business practices are now part of the game plan. Underestimating these elements is a risk no CEO can afford.

The success of any company, whether it’s a small business or a global corporation, must have protective mechanisms in place that will protect it. If the leaders can’t identify the various risks, there can be no realistic protections in place. How will the capital requirements change in the coming years? Can the business model accommodate those changes? Better still, is the company being led by those who are willing to step up to the plate and make those hard decisions when necessary? What a leader could have done in the past might not be a realistic approach today. Corporate development efforts often require a bit of a “fearless leader” mindset. It goes much further than simply having strong leadership abilities.

Corporate development isn’t a static effort; it plays a significant role in a corporation’s ongoing approach. As part of its strategy, a healthy organization may develop an internal corporate development team or may consider outside help in areas such as strategy consulting, tax structuring, legal compliance, financial considerations and marketing and operations.

Even with a solid business foundation in place; one that has served its purposes well over the years, there comes a time when corporate development is not only inevitable, but a welcome strategy.

Kill the Company

Jul08
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no_way_signNormally, we think of a business strategy comprising the mission, vision, and values of a firm.  Strategic plans are operational and tactical, often with a three to five year outlook.  However, what happens if your strategy isn’t working?  Or, if you sense a strong competitive threat?  A new book by Lisa Bodell, “Kill the Company,” offers some advice for organizations that are stuck in a rut of incremental improvement.

Firms can easily be seduced into a culture of complacency when their strategy  is working.  Yet, the industry, competitors, and customers can change rapidly.  One way to shake up the strategy is with a tool from Lisa’s book – literally, killing the company from within.

This strategic exercise goes beyond a traditional strategic threats analysis.  Results of competitive analyses usually leave the firm with plenty of data; however, the outcomes of kill the company are immediately actionable.

Here’s how it works.  The company plays the role of a competitor who desires to put their own company out of business.  With their inside knowledge, the team can focus on weak points and enhance the firm’s own strengths.

For instance, one outcome of a kill the company exercise might note that the firm’s distribution system is particularly weak and competition can put the company out of business with faster and more efficient shipping.  Recognizing this weakness, management can tackle the distribution chain before it becomes a strategic threat.

Kill the company can help a firm recognize strategic pathways that other brainstorming tools cannot.  It is a surprisingly effective communication tool as workers are more energized to “kill the company” than they are to make long lists of competitive weaknesses and threats to the firm.

Contact us to learn more about tools to develop an effective business strategy.

Creating a Winning Strategy: Aligning Company Vision with Market Opportunities

Jun11
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rock_concertThe path to achieving strategic business goals — whether pursuing operational excellence, or growth opportunities — requires a certain amount of change. So is change necessary to win in today’s competitive economy? W. Edwards Deming, the so-called father of the quality evolution flatly  informs us: “It is not necessary to change. Survival is not mandatory.”

This is a stark warning to those companies and leaders who are stuck in their ways. Change must be embraced. If it’s avoided the inevitable outcome, according to Deming, is an eventual collapse and failure of the outmoded firm; supplanted by more innovative companies that better serve customer needs. Therefore it seems wise to heed the common platitude: change is the only constant.

So what does it take to make a business not only succeed but flourish? First, there needs to be a clearly articulated vision and strategy. The strategy should be informed by the vision of the company. The vision is where the company sees itself going, based on its strengths, and market opportunities.  To fully realize the company vision, however, a well crafted strategy must be designed, communicated and followed.

Given the company culture, the strategy is a playbook that aims to inform the planning process to guide operational activites. This achieves alignment such that everything works together toward achieving the company’s strategic goals, bringing it closer to its vision. After agreeing on company goals — targets to aim for — a strategy can then be formulated to navigate the market to successfully achieve these ends.

Without a formally thought out and articulated strategy that guides and informs daily decision making, there would be a chaotic environment, indecision, waste and inefficiency. A failure to execute a rational strategy will lead to lackluster company performance. Clearly, it is critical to have the right strategy.

Contact us to learn more about how Garrison Street can deliver results for you.

It Must Be Worth Twice That … I Hope

Oct24
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A first in a series of upcoming articles on strategy and corporate development written by Garrison Street.  “It Must Be Worth Twice That … I Hope?” provides a blueprint  to understand and unlock the value of a company as seen through an outsider (an investor) evaluating the company.

To read more click the link below:

It Must be Worth Twice That … I Hope?

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