As we mentioned last week in the “EBITDA Multiples” Deal Note®, the primary factor that drives a company’s value is risk-adjusted projected cash flows. One of the most significant inputs to forecasting future cash flows is the company’s intellectual property. Substantial IP gives support and justification for strong future revenues and margins.
In previous Deal Notes®, we discussed “Assessing Intellectual Property” followed by “Protection of Intellectual Property.” In both posts, there was an emphasis on patents. While patents are often the most discussed component of IP, today we are explaining what else makes up IP in aerospace and defense: trademarks and trade secrets. These are components of value that business owners regularly ‘leave on the table’.
Trademarks protect symbols, names, and other identifiers that distinguish goods and services in the marketplace. The trademark registration process is relatively cheap and usually takes 1-2 years. While trademarks aren’t pivotal in the middle market of aerospace and defense, the reputation of your business is important. For example, think of a reliable and quality supplier of yours. The fact you thought of that supplier/their brand represents value for that company. Trademarks provide protection to that brand.
Trade secrets encompass a broad category of confidential business information that provides a competitive advantage and is guarded against unauthorized disclosure. Aerospace and defense manufacturers often develop unique and highly efficient manufacturing processes that contribute to the quality and performance of their products. Trade secrets help protect these proprietary methods, ensuring that the manufacturing techniques remain confidential and exclusive to the company that developed them.
Our previous clients have seen that trademarks and trade secrets, when marketed to potential buyers intelligently, can maximize the value of their company sale and exceed their expectations.
Have a great day everyone,