In 2020, many, heretofore, great companies, with long histories- some public, some private- have failed- as their competitors have scaled.
In many cases, operating profits of, otherwise, great companies have declined or disappeared, resulting in business closures and bankruptcies.
But what remains for these companies, in many cases, is great Intellectual Property (“IP”)- trademarks, copyrights, and patents- that will be ripe for acquisition by distressed asset investors and industry competitors in 2021.
While, in many cases, companies buy other companies stock just for the acquired company’s IP, a company need not acquire or merge with an entire business (i.e. buy its shareholders stock) in order for that company to acquire a particular IP asset; select assets can be bought from a company without buying the entire [operating or liquidating] business and its other less valuable assets- and its legal and financial obligations and liabilities.
In 2021, IP assets of failed or failing businesses can be particularly appealing where their respective owner’s business failed, primarily, or solely, during and due to the COVID-19 crisis and to the company’s overall loss of market share to competitors that were able to scale faster and bigger during the crisis and use technology more effectively, rather than because of any lack of market interest in, or market share of the IP (brand or product). In many cases, the brand or product may be well-like and highly regarded, but the economics of business during and in the aftermath of COVID-19 became just too different and too challenging for smaller companies or less digitally-savvy companies to overcome. In other words, it was the company’s operations structure and sales methods, and not their products or brands, that caused the business to decline or fail.
Brands and Trademarks
For world-renowned retailers that have closed their doors or that are in the red, their trademarks- their store names- still have meaning to people, and still have value- especially to e-commerce retailers. In such cases, an existing e-commerce retailer or a private equity acquirer of such a trademark can set up an e-commerce company/division and website/webpage just for products to be sold under that acquired store-name/trademark.
For manufacturers that have failed or are failing, their proprietary trademarks– their company name or product brands- often have continuing notoriety, and, thus, value to another company with better operational efficiencies and more fully-developed direct-to-consumer sales channels. In such situations, an existing e-commerce or large brick and mortar (and omni-channel) retailer could consider buying the trademark and making it a “house brand” (a/k/a a private label), or a larger manufacturer can buy the trademark and implement the brand and branded product-line into its existing manufacturing process and cost structure.
Content and Copyrights
For content providers- such as newspapers, magazines, and production companies- that have folded or are increasingly unprofitable due to to online competition for eyeballs, it’s not only their names and trademarks that may have value, but it’s also their libraries of decades of copyrighted materials that could remain valuable to online content providers. One way to capitalize on this would be for a social media company to create an original content division and a pay-per-view format over its digital platform; or, such a company could offer the content for free over its platform to attract more users. Another possible scenario is for an existing old-line media company to add the exclusive content to its existing library of entertainment offerings to use or license for use on TV or other companies’ websites, or beef-up its proprietary content and launch its own a direct-to-consumer streaming service that competes with the large digital content streaming companies.
Technology and Patents
As smaller technology companies burn cash and go bankrupt while swimming in the wake of their stronger competitors, their clever and revolutionary patented technologies can outlive their operations. Inventors that have lost any path-to-market in industries and sectors controlled, more and more, by large corporations in those markets, can sell potentially valuable assets inside of or prior-to filing a Chapter 11 or Chapter 7 bankruptcy. Such a scenario could allow for another existing technology company to add a new proprietary product-line based on those acquired patents to its existing offerings and then capitalize on its own brand awareness and existing distribution channels to rapidly scale sales. Or, a private equity group could buy a strong patent and launch an entire well-funded company around it with the objective of exiting through a public stock offering or an eventual sale to a larger technology company after proving sustainable demand.
2021 could be a banner year for IP transfers due to the COVID-19 crisis that rapidly shifted the structure of the economy and companies’ business models, allowing large companies to grow larger, leaving, otherwise, successful companies with popular products and well-known brands, behind. In the coming year, we will, see unprecedented opportunities to buy famous brands, recognizable original content, and technologically-advanced patents and patented products whose owners have lost their respective abilities to be profitable in 2020, and thereafter, in a marketplace where the big just get bigger and more powerful, and where companies either “scale … or fail”.