11b valuation presentation v4i-intangible
DESCRIPTION
Presentación de valoración Elena Canetti- taller CORFO 2012TRANSCRIPT
Technology Valuation
2012
4 innovation
Introducción VALORACIÓN DE TECNOLOGÍA
Proceso de Transferencia Tecnológica
La valoración y valorización son esenciales en el proceso de transferencia
Valoración-Assessment y Valorización-Valuation
Valoración y valorización son etapas consecutivas en el proceso de transferencia
IDEA Solución
tecnológica Prototipo
tecnológico Empaquetamiento
y Transferencia
Valoración (IP & Market Assessment)
Valorización (Valuation)
Riesgo
Criterios de Valoración
Tecnología
Fortaleza Propiedad Intelectual
Competidores y Tecnologías de la Competencia
Potencial Mercado Comercial
Tecnología
Descripción
Beneficios
Aplicaciones de la tecnología
Costos de la tecnología
Estado de desarrollo
Regulaciones nacionales y extranjeras
Propiedad Intelectual
Titularidad de la PI
Acuerdos previos
Viabilidad de protección
Patentes relacionadas
Estrategia de Protección
Competidores
Problemas que resuelve la tecnología, soluciones existentes
Tecnologías de la competencia
Competidores
Potencial de Mercado
Mercado potencial
Tamaño de mercado actual y proyectado
Mercado de interés
Requisitos del mercado
5 Factores de interés
Beneficios de la Valoración
Razones Fundamentales
Delinear estrategia de
protección de PI
Permite identificar nuevas aplicaciones
Reducir riesgos legales
Definir el modelo de negocio
Decidir el modelo de transferencia
Definir la estrategia de comercialización
INSUMO RELEVANTE VALORIZACIÓN
VALORIZACIÓN DE TECNOLOGÍA
Index
11 Technology Valuation
1. What is the right price: Value Vs. Price
2. Basic Methods of Valuation
1. Back Perspective
2. Around Perspective
3. Pieces Perspective
4. Down Perspective
5. Forward Perspective
6. Dice Perspective:
7. 7, 8 and 9. Auction, Common Sense and Equity
Perspective
3. Conclusions
12
What is the right price: Value vs. Price
Value
An amount considered a suitable equivalent for something else.
Price
The sum of money or
goods asked or given for
something.
Technology Valuation
13
Price vs. Value
Licensee’s Ceiling
Licensor’s Floor
Range of Negotiation
Technology Valuation
14
Valuation: a rational process
Without a valuation basis
With a valuation basis You negotiate the basis
You negotiate from emotion
Technology Valuation
15
When is Technology Valued?
By litigators, value established at a point in time.
Adversarial: the outcome is imposed judicially.
By deal makers, Value extracted over time. Prospectively
Retrospectively
Technology Valuation
16
Prospective Valuation: Financial Forecast
The calculation of royalty, depends on:
Technology Scope
Number and scope of patents
Know how
Patent age
Number of potential applications
Stage of technical development
Barriers to market entry
Exclusive or non exclusive rights
Technology Valuation
17
Basic Methods of Valuation
The licensing perspective:
1. Back perspective Costs
2. Around perspective Industry standards, comparables
3. Pieces perspective Ranking/rating
4. Down perspective Rules of thumb
5. Forward perspective Discounted cash flow
6. Dice Perspective Monte Carlo
7. Others Perspective Auction
8. No farther Perspective Common sense
9. Market Perspective Equity
Technology Valuation
1. Back Perspective Methods
18
Is cost to develop relevant? Development costs, patent costs?
NO! it is a poor method for pricing.
However it can be useful for:
Development costs as a factor in determining value
Modified replacement cost to calculate upfront
Technology Valuation
19
Also named the Cost Approach
Theoretical Background:
Value is determined by the cost to replace or the cost to recreate the IP.
Costs include:
R&D, Materials, Equipment, Marketing, Advertising, Delayed Market
Entry.
Value of the IP:
Fair market value of total investment to replace or recreate the IP.
NOTE: A licensee will not pay more for the IP than the amount for which the IP
could be recreated.
However, by licensing IP from others the licensee avoids development
costs and minimizes risk.
Technology Valuation
20
2. Around Perspective
Constitutes of looking at sources of comparable transaction data:
Internal Database
Published Surveys
Public Announcements
Word Of Mouth
Litigation
Required Disclosure
Technology Valuation
21
Royalty Rate Standards
Comments Royalty Product
1 % commodities, 2% processes 1 – 4 % Materials Processes
3 – 5 % Medical Device
5 – 15 % Software
Chip design 1 – 2 % Semiconductors
Composition of materials 8 – 10 % Pharmaceuticals
With clinical testing 12 – 20 %
New entity 4 – 5 % Diagnostics
New methods 2 – 4 %
Processes non exclusive 1 - 1.5 % Biotechnology
Processes exclusive 1 – 2 %
Adapted from Lita Nelsen, Director TLO of MIT
Technology Valuation
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Licensing Executives Society – AU NZ Royalty chart
Industry No. of
Licenses Min Max Avg. Median
Automotive 35 1.00% 15.00% 4.70% 4%
Chemicals 72 0.50% 25.00% 4.70% 3.60%
Computers 68 0.20% 15.00% 5.20% 4%
Consumer Goods 90 0.00% 17.00% 5.50% 5%
Electronics 132 0.50% 15.00% 4.30% 4%
Energy & Environment 86 0.50% 20.00% 5.00% 5%
Food 32 0.30% 7.00% 2.90% 2.80%
Healthcare Products 280 0.10% 77.00% 5.80% 4.80%
Internet 47 0.30% 40.00% 11.70% 7.50%
Machines/Tools 84 0.50% 25.00% 5.20% 4.50%
Media & Entertainment 19 2.00% 50.00% 10.60% 8%
Pharma & Biotech 328 0.10% 40.00% 7.00% 5.10%
Semiconductors 78 0.00% 30.00% 4.60% 3.20%
Software 119 0.00% 70.00% 10.50% 6.80%
Telecom 63 0.40% 25.00% 5.30% 4.70%
Technology Valuation
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Around Perspective Sources
Most valuable tool for determining industry standards is the use of
published agreements.
Published Data
• www.knowledgeexpress.com
• http://pharmalicensing.com/public/
• http://www.innovaro.com/
• http://www.yet2.com
Litigation
• Lexis/Nexis www.lexisnexis.com
SEC filing
• SEC EDGAR system www.sec.gov/edgar/
• EDGAR online: pro.edgar-online.com or www.tenkwizard
Databases
• www.recap.com (Deloitte)
• www.rDNA.com
• http://www.recapip.com
• http://www.recaprx.com
• www.royaltysource.com
• www. techagreements.com
• Disclosure Information, Inc. www.thomson.com/financial/fi_partners.jsp
Technology Valuation
24
3. Pieces Perspective
The ranking method:
Uses data from similar agreements
Uses a rating table to score the deal compared to known prices from
comparable deals
Technology Valuation
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The Georgia Pacific Factors:
LICENSING OUT SCORE IMPORTANCE OF FACTOR
4.2 Nature of Protection
4.2 Utility over old methods
4.1 Scope of exclusivity
3.4 Licensee’s anticipated profits
3.4 Commercial Success
3.5 Territory Restrictions
3.7 Comparable License Rates
3.1 Duration of Protection
3.1 Licensor’s anticipated Profits
3.6 Commercial Relationship
2.1 Tag Along Sales
Stephen Degnan and Corwing Horton, “A Survey
of Licensed Royalties”
5 = MOST IMPORTANT, 1 = LESS IMPORATN
Technology Valuation
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Common 5 factor approach
WEIGHTED
SCORE
WEIGHTING
FACTOR
SCORE OF 1
TO 5
FACTORS
0.4 0.2 2 STAGE OF DEVELOPMENT
0.8 0.2 4 SCOPE OF IP PROTECTION
1 0.2 5 MARKET ATTRACTIVENESS
(SIZE)
0.6 0.2 3 SUSTAINABILITY VS.
COMPETITIVE TECHNOLOGIES
0.6 0.2 3 INDUSTRY PROFIT MARGINS
3.4 TOTAL WEIGHTED SCORE
Technology Valuation
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4. Down Perspective
Rules of Thumb
The 25% Rule: the Goldscheider Principle: the Licensor should receive 25%
and the Licensee 75% of the pre-tax profits from a licensed product.
The second rule of thumb, converts roughly the 25% pre tax profit to 5%
royalties
Technology Valuation
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25% Rule
Meaning of the Rule
The royalty in dollars should be 25% of the savings in dollars to the licensee
by the use of the licensed technology
The royalty in percentages of net sale price should be 25% of the profit
before taxes, enjoyed by the licensee by selling products based on the
licensed technology
Technology Valuation
29
Example of the 25% Rule
Percentages Thousand of US
Dollars
Annual Report of Company Y
100 1,249,512 Gross Sales
52 643,357 Cost of Goods Sold
48 606,155 Gross Margin
36 447,607 Sales and Administration
11 140,196 Research and Development
1 18,352 EBIT (Profit before Tax)
8,090 Interest
3,697 restructuring
9,674 Other
(3,109) EBT (profits after tax)
Should the royalty be 0.25 % from net sales?
Technology Valuation
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5. Forward Perspective
Discounted Cash Flow/Net Present Value:
The method consists of determining future cash flows, then discounting the
cash flows for the time over which those amounts are to be received and by the
associated risk of receive such cash flows.
When all such cash flows have been discounted they can be added to
determine the net present value (NPV)
Technology Valuation
31
Also Named the Income Approach
Theoretical Background:
Value is determined by the economic benefit expected from use of the IP.
Value of IP:
Present value of the expected future income stream.
Key parameters:
Amount of income stream
Duration of the income stream
Risk associated with the realization of the income
Note: Two well known methodologies: Excess Earnings and Relief from
Royalties.
Technology Valuation
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Value: Risk plus timing and amount of future cash flows
METHOD OF CALCULATION OF NPV
xxx Sales
yyy Expenses
zzz Depreciation
rrr Royalties
EBT EARNINGS BEFORE TAX
ttt Taxes
EAT EARNING AFTER TAX
ddd Depreciation
iii Investments
www Working Capital
NCF NET CASH FLOW
NPV = Rn/(1+k)n Discount Cash by NPV
Embody risk in k Choose k.
Technology Valuation
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Calculation of NPV
Each year cash flow (R in year n) is discounted by dividing each cash flow (R)
by the term (1+k)n, where:
k - is the hurdle or discount rate
n – the year from the date in which the projected cash flow occurs
NPV = Rn/(1+k)n
Technology Valuation
34
Discount/Hurdle Rates for Start-Ups
Hurdle Risk Stage of Development
Pre-seed funding 100 % Research and Development
New business, seed funding, R&D stage 50 – 70 % Start Up
New business product ready for sale, no
R&D required
40– 50% 1st Stage
New product and technology in existing
business
30– 40% 2nd stage
New product, existing capabilities, known
technology
25 – 30% Mezzanine/IPO
New product for existing manufacturing line
and market
15% Low Risk
Technology Valuation
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Example of NPV calculations
Investment or
Licensee’s
decision
Net Present Value Hurdle Rate = k
yes No Risk 126,000,000 0 %
yes Near Risk free, alternative
investment is 7%
49,000,000 7 %
yes Low but real risk 17,000,000 15 %
Barely yes Significant, technical,
market and other risk
1,600,000 30 % - 40 %
No, only if you
paid me
Start up risk - 800,000 40 – 50 %
136,000,000 Total Cash Flows 10,000,000 Investment
Technology Valuation
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6. Dice Perspective Montecarlo
Complex Mathematical modeling tools
A basic popular tool is the probabilistic model or Monte Carlo analysis
The tool works by replacing certain numbers in the calculation with a
probabilistic value. The model is run hundreds of time to develop a
distribution of outcomes
Technology Valuation
37
Monte Carlo Simulation Software
The popularity of Monte Carlo methods have led to a number of commercial
tools.
Programs which work directly with Excel as add-ins:
Crystal Ball
Risk Solver
@Risk
DFSS Master
Risk Analyzer
MC Add In for Excel
Technology Valuation
38
Plus and Minus of Monte Carlo
PL
US
• The model can be run over and over again with changing assumptions
• You get better understanding of the assumptions and their economic impact
• High risk technologies are not punished with high hurdle rates.
MIN
US
• There is never a right answer • Requires appropriate software and user experience
Technology Valuation
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About the other perspectives
6. Others Perspective: Auction
Technology auctions are rare, however patent auctions are not so rare
They are used for example in cases of bankruptcy or shut down
7. No farther Perspective:
Common sense
8. Market Perspective:
Equity – what is the value of a similar size, similar technology company
in the stock exchange?
Technology Valuation
40
The Market Perspective or Approach
Theoretical background: value is based on the transactions of other
purchasers and sellers in the market place.
Value of IP: Arm’s length price paid in equally desirable and comparable
transactions.
Note: The Licensee is not willing to pay more than others have paid for similar
IP
Comparables: type of IP, industry, market size, terms and profitability.
Technology Valuation
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IP Value in the Market
Technology Valuation
42
NASA wants to move beyond Technology Auctions
By Frank Morring, Jr.
Washington
NASA managers are looking for new ways to get the technology its engineers develop for
space exploration out into the broader U.S. economy, where businesses can adapt it for
commercial products.
A new request for information published on the FedBizOps website seeks suggestions on
how the space agency can work with intellectual property management services to match
advanced technologies at its field centers with private firms willing to pay for licenses to use
the publicly funded technology for private profit.
AviationWeek.com
NASA Wants To Move Beyond Technology Auctions Sep 21, 2010
Technology Valuation
43
Patent Transaction
Basic Process
Review and estimate valuation of the assets
Diligence and preparation of the assets to market
Preparation of marketing materials
Identification and contact of potential acquirers
Fielding, negotiation of and advisement on received offers
Advisement on all aspects of documentation and transfer
Escrow Services (as necessary)
The Sale and/or License of Intellectual Property – Patents
Technology Valuation
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Conclusions
Valuating your technology is an excellent way to prepare for the negotiation of a
successful deal (win win)
The Valuation of the technology is an essential part of the technology transfer process
With a valuation you negotiate with a sound economic basis and not from an emotional
basis
Valuation of the technology is a way of determining the licensed technology value for the
customer (licensee) and not only for the inventors (licensor)
Using more than one valuation method gives you a broader perspective, and accounts
for a range of different factors
Technology Valuation
4 innovation
Elena Canetti - Israel Partner