Intellectual Property (IP) is the collective set of intangible assets that makes a company unique in the marketplace. While normally paramount for manufacturing companies, IP can be a highly valuable asset for any business in the aerospace and defense industry, not just the OEMs.
The most recognizable form of IP protection is a patent. However, there are many circumstances when IP is not patented but nevertheless is extremely valuable. In aerospace and defense, IP can take many forms other than a patent. In the supply chain for commercial aircraft components, IP can take the form of STCs and PMAs, among many other forms. In the supply chain for military products, IP can take the form of SARs, among many other forms. In some cases, a business that develops IP may choose not to patent their product, even though it can be patented, for various competitive reasons, which we will address in a future Deal Note. In other cases, the IP might be something that cannot be patented easily.
Frequently IP in the aerospace and defense industry is a manufacturing process that enables a business to deliver a product with higher quality and lower costs than its peers. IP professionals refer to this as “Process Knowhow Intellectual Property”. In certain circumstances, Process Knowhow can be extremely valuable, especially when a highly trained and talented workforce has developed truly unique way to achieve unmatched production quality and efficiency.
Whether you are a seller, or a buyer of companies in the middle market of the aerospace and defense industry, a market-based assessment of the value of the applicable IP is critical to achieving a successful outcome from any M&A process.
Have a great day everyone!
Managing Director, Defense