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Technology Transfer in M&A Deals
Technology Transfer – M&A
To maintain a competitive edge, companies greatly focus on mergers and acquisitions (M&A). Technology transfer plays a key role in these M&A deals which is a process of dispersant of information specifically inventions, technical knowledge, or trade secret information and products from one company to another.
In the transfer process, new technologies are acquired externally rather than using the company’s internal R&D activities i.e., the technology creator is a different entity. This technology transfer braces the market value of the company through which the company can develop new products or enter a new market segment or area or jurisdiction which would not be possible before due to cross-border restrictions.
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For entities such as research organizations or government organizations or small start-ups that do not have enough funds to generate revenue or launch products in the market based on the technology they have, can decide to merge/ collaborate with an organization, and the technology transfer process happens for monetization or to introduce the technology to the market by the organization. Also, for solving some complex technical issues, organizations come together as a single consortium to reduce the cost.
Considering the importance of technology transfer, utmost care must be taken to assess the capability of the technology in the future and decide which technology acquisition or merger will be advantageous to an organization or which may create a bottleneck.
Therefore, it is important to know the below-mentioned points for an effective merger or acquisition:
- What Competitors Are Doing?
- How Are They Doing?
- The Importance of a Technology they are Working upon in the Coming Future.
In M&A deal for a seller such as a university, a start-up, or a consortium, it is important to understand the assets it has based on intellectual property laws such as patents, trademarks, trade secrets, and product portfolio. Then based on these assets, determination can be made about the potential acquirers or target merging organization that would match the technology segment or could generate benefits, and in the end either licensing the technology or divestiture based on the terms of the agreement or merging with the target organization may occur.
Further, for a company interested in acquiring other companies i.e., an acquirer, the process of technology transfer occurs firstly by determining a technology of interest through technology scouting and analysis of patents, technical and legal information through portfolio evaluation, and establishing proprietorship using intellectual property laws. This information helps in a full landscape analysis of what is happening around the area of interest and where it is happening and who is working on it. Further, it should also be considered when a final transfer agreement will be signed which will make possible the calculation of the expected lifetime of the technology of interest or how mature the technology is.
One of the most successful technology transfers till date is acquisition of Android Inc. by Google where the original idea of Android was to develop an operating system for camera storage where users don’t have to rely on camera storage. The shrinking of camera market as it was not big enough made Google acquire Android Inc. where team members spent almost three years in modifying and developing OS for mobile devices. This resulted in development of Android not only for mobile phones but also for smartwatches, tablets, smart TVs, and more, where it beat most of its competitors developing operating systems.
Though the seller and acquirer side processes look different, the end requirement for both through M&A deals is to generate a good amount of revenue and consider all the information associated with the technology may it be IP, or market maturity of the technology, or product portfolio.
Also, the other important factors which will help in future research and development of the acquired technology which is in the infant stage are:
- The Skill Level of the Employees to use the Technology,
- What Technical and Market Knowledge is available About the Technology, And
- Understanding the Supply Chain of Organizations or Experts who can make the Technology Flourish.
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