Due Diligence is a process of investigation or audit of a company or individual with which a business transaction is to be carried out. It therefore consists of a review and analysis of all financial records, including Intangible Assets, to assess the costs, risks and benefits of an acquisition.
Once the registration and legal status of a company’s or individual’s intangibles has been determined, it is important to know their value.
Unlike tangible assets, which have various well-established methods for determining their value and therefore their price, there is no simple formula for calculating the value of Intangible Assets such as Patents, Trademarks or other forms of Intellectual Property. However, when the time comes to sell or license these assets, it is necessary to establish a price.
Different methodological approaches can be used for this assessment, which will have a high component of subjectivity and depend on the data used in the model. Therefore, the assessments derived from each approach will be different. However, these valuations will provide a framework that will allow certain parameters to be established within which a reliable value can be determined and, in many cases, to guide a negotiation process that includes not only the amounts to be paid but also the manner and timing of payment.