Mergers and Acquisition

Topics: Knowledge management, Knowledge, Community of practice Pages: 24 (9227 words) Published: August 11, 2013
On the Importance of Managing Intangible Assets as Part of Corporate Strategy Abstract: Given that a high number of companies return value to investors via acquisition rather than a public offering the development of intangible assets is the bait that sets up the acquisition. This paper discusses how companies can fast track to high valuation by strategic growth of certain intangible assets such as customer tribes, brands, and intellectual property, comparing those strategies to larger companies. It further describes a strategic planning methodology using four asset categories (Market, Infrastructure, Human Centred and Intellectual property) to describe the enterprise as it would be if it had achieved its strategic goals. This state is referred to as the “Dream”. The Dream is characterised by a set of affirmations describing the “health” of the enterprise’s assets. This is called a “Dream Ticket”. Keywords: Intellectual Capital, SMEs, IC methodology, strategic business planning

1. Introduction
Strategic planning can be described as the process of determining what a business should become and how it should go about achieving its goals whilst capitalising on its opportunities and addressing its challenges. For management teams this can be a real challenge, especially if the strategic goal is couched solely in terms of revenue. For SMEs this is likely to be the case as the number one priority may well be just to stay afloat in very difficult times. For small companies defining corporate strategy can be a challenge, especially where they have limited access to business mentors or consultants that can assist in facilitating the process, so the CEO typically sets the scene by stating where the company needs to be in one or more years time by way of a mission statement that encapsulates values, vision and purpose. As such it’s a “what we will do” type statement that may mean a lot to the management team that brainstormed it but hard for employees who did not participate in the process to grasp or believe in. In the same way as a book title may not convey the story to the reader until after the story has been read, a mission statement may not convey the strategy until the story can been shared. The Dream Ticket method enables management to share the story with employees. Entrepreneurs start companies by bootstrapping or raising angel or venture capital. The high technology sector typically takes both angel and venture capital as there is usually a time to market issue when the company will be in research and development mode and will not be generating revenue. Given most VC funds seek to realise a return on investment that requires an exit in less than ten years it doesn’t leave the entrepreneur much time to create an enterprise of value. This situation is exacerbated when there are several years of development ahead before product is ready for market. Ironically the more revolutionary or disruptive the technology, the longer the time to mass market share shortening the time to grab it. Further, given exit is a requirement for investors, the challenge facing the management team and Board is how to get the highest valuation at exit in the time available. As high technology companies tend to manifest value by way of intangible assets it makes sense to develop a corporate strategy that grows and develops them. The challenge is to figure out what assets to develop and how to do it for maximum value. The Dream Ticket method acts as the mechanism to do this.

2. The Dream Ticket methodology
There are four sets of assets that are used to build a Dream Ticket:  1. Market Assets, these are assets which belong to the company and give it power in the marketplace. They include brands, positioning, customer base, company name, backlog, distribution channels, collaborations, franchise agreements, licensing agreements, favorable contracts and so on.


Annie Brooking  2. Infrastructure Assets, these are assets which include...

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