The Challenge
A large diversified company had portfolios in apparel, home appliances and more. This company was on the lookout for different types of heat exchanger technologies and/or a distressed company with this technology that they can acquire to integrate into their existing and new product lines.
Since the industry is changing rapidly, the client did not want to invest in R&D to develop something on their own. Instead, they want to adopt or acquire technologies from the heat exchanger technology domain or even from lateral industries to best suit their needs. As they are looking to launch products in the UK, they would prefer the technology is well protected in the UK, or that the company has strong IP and business established in the UK.
With respect to acquiring companies in this domain, the client did not want to rush the process. Instead, they want to monitor and vet the prospects before indulging in negotiations with them.
Our Solution
The client approached our team for its Distressed Company Asset Identification and Monitoring Mechanism to help them with this process. Based on this discussion, our team suggested the following parameters or indicators that would help to identify companies that have entered a distress situation or are going to enter a state of distress in future:
- Attrition rate of the company or change in personnel in key roles
- News on the heat exchanger technology in UK
- Consumer sentiment on heat exchanger technology products e.g. water heaters and home heating solutions
- Sales numbers or reduced positive cash flows
- Abandoned or declines in fee payment for patents of heat exchanger technologies
- A mixture of financial parameters indicating overall financial health
- Recent mergers or acquisitions
After identifying relevant classifications for pertinent technology, our team formulated a broad search string based on the relevant IPC/CPC found to select companies based on Intellectual property assets. Our team ran these search strategies on our search database to find the assignee companies that have active patents for the relevant technology in the jurisdiction of interest.
After eliminating big companies, prominent players, client’s competitors or players with whom they already have or had discussions, our team performed analysis for all assignees. Our team then monitored the distress parameters of assignees in a period (for example one month) to identify the current situation of an assignee. The change in the distress parameters over multiple consecutive periods is used to identify distress triggering. The change in the traffic light assessment color (green to orange or orange to red) for each distress indicator in the period is used to identify whether the company is inching towards distress or not.
The reports for each assignee or assignees with considerable activities in consecutive months (or time period) will look like as follows:
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No Distress |
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Inching Towards Distress |
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Distress |
Our monthly Distress Reports provided to the client revealed the following insights about Company ABC:
- Our Distress Report traffic light type indicator showed a change from orange to red in financial health to indicate a financial distress.
- Our Distress Report indicator for Recent Mergers or Acquisitions changed from green to red, revealing negative growth and reduced market interest.
- Our Distress Report Attrition rate indicated an instability in the organization when Company ABC’s Italy facility was shut and skilled labor was laid off.
- Our Distress Report IP assets indicator changed from green to red during the analysis period, as the number of abandoned patents increased drastically. This showed that Company ABC had a shortage of funds as they were not able to renew or pay the maintenance fees for their patents.
Business Impact
Our monthly Distress Reports indicated that Company ABC was slowly entering a state of distress. Based on these observations from our Distress Report, the client was able to make informed decisions that gave them significant strategic advantages and cost savings:
- Our Distress Reports saved the client £50 million due to smart tracking, timely distress indication, and objective traffic light marking indicator.
- Purchasing strategic patents and licenses at a discount: As Company ABC was already in a financially distressed state, the client was able to settle a deal to buy five patents in the Domestic Heater exchanger domain for only 30% of the cost that Company ABC was demanding the year prior. Also, the client was able to obtain a license for three core patents of Domestic Heater exchanger at 45% of the asking price last year.
- Cost savings of £12 million in R&D investment: Our Distress Report saved the client £12 million of R&D investment, as the client was able to acquire vital patents and settle a licensing deal for some core technology patents from Company ABC.
- Strategic advantages in the new geographic market: Our Distress Report revealed that Company ABC’s Italy facility was shut down and skilled labor was laid off, giving the client an opportunity to acquire the facility and hire skilled employees to start a new plant in Italy. The client will now be the sole manufacturers of domestic heat exchangers in Italy and will have a monopoly in the Italian market.
Save £50 million
Due to smart tracking, timely distress indication and objective traffic light marking indicator
Cost savings of £12 million in R&D investment
Our Distress Report allowed the company to acquire a new facility and hire skilled employees to start a new plant
Gain strategic advantages in a new market
by identifying lucrative partners for collaboration
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