Ignoring IP assets when the liquidator comes in…

by Andrew Watson on 1 April 2010

I’m a regular listener to the excellent Planet Money podcast by a team over at NPR that makes economics fun and engaging (or rather more fun and engaging).

Catching up today, I listened to their podcast: A Private-Equity Boss In Four-Inch Stilettos about Lynn Tilton, CEO and founder of Patriarch Partners. Patriarch describes itself as:

A vertically integrated distressed private equity firm with robust in-house operational turnaround expertise

Basically they are a $7 billion PE outfit that specialises in companies about to go bankrupt. The Planet Money team followed Lynn and one of her investments, catalog company Spiegel and listened to their experience about being rescued through private equity money.

It was down to the wire for Spiegel for getting the investment from Patriarch to save the company. The managing director was already at the stage of talking to their bank’s liquidators about selling the rest of Spiegel’s merchandise of clothes and accessories and closing things down.

To hear Speigel tell it in the story, it very much seems the bank’s only focus was on selling the remaining merchandise and not on the Spiegel brand or its other intangible assets, such as its long customer relationships and sales database or its e-commerce platform.

From an IP perspective, ignoring the intangible assets misses a HUGE likely chunk of the value of a company. For most companies these days, the largest part of their value will be their intangible and IP assets. It very much seems like Lynn and Patriarch saw the value of Spiegel’s IP assets where the bank did not and snapped up quite a deal.

The sad thing is that from what we hear, many times in bankruptcy or insolvency the true value of the IP gets lost and the focus goes back to calculations around the bricks and mortar physical assets.

Definitely worth a listen.

{ 1 comment… read it below or add one }

Andrew Watson 04.03.10 at 1:49 pm

Jordan. Great post. Another “arbitrage” example where one part of the transaction knows more than the other. I wonder if insolvency practitioners will only begin to look into the intangible assets they control when a creditor takes them on legally for failing to fulfil their personal (at least in the UK) obligation to realise optimum value for creditors. Can an insolvency practitioner seriously state that it has done so without understanding the quality of all of the assets in his hands?

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