A few weeks back, I talked a bit about a trend called the acquihire, where you acquire a company more for the talent in the company than the products they have or the revenue they'll bring to the table.
That underscores the fact that in a digital economy, there are sometimes items more valuable that current revenue or product line.
Today, I'm going to give you another type of acquisition, without a catchy name. It's the acquisition that's completed solely for Intellectual Property, which can be then used in R&D or in today's increasing legal world, to protect a company against patent lawsuits.
Example - Google's acquisition of Motorola in 2012, and it's subsequent announced sale of Motorola to Lenovo this week. Back in 2012, Google was facing a patent lawsuit hell at the hands of companies like Apple. GigOM explains:
"Recall that one month before the acquisition, Google’s rivals — including Apple, Microsoft and BlackBerry — had snapped up a coveted patent portfolio at auction, giving them a new stick to pummel Google in a global and ever-sprawling legal battle over smartphones.
The deal, then, gave Google a chance to counter-attack or at least hold its ground thanks to Motorola’s intellectual property, which reportedly amounted to 17,000 issued patents and 7,500 applications. Google has never been a big booster of a patent system that awards patents for inventions like a “method of swinging on a swing” but, given the context, this was a case of if you can’t beat ‘em, join ‘em.
Or, as programmer Robert Eric Raymond put it at the time: This is Google telling Apple and Microsoft and Oracle “You want to play silly-buggers with junk patents? Bring it on; we’ll countersue you into oblivion.”
So Google paid 12.5B for Motorola, and the announced sale to Lenovo was for 2.9B. Someone should be losing their job, right? Not so fast. The acquisition was completed in 2012 more for patents than people or products, and a closer look at the math indicates they didn't lose as much as you think. More from Techcrunch:
Motorola Mobility is being sold to Lenovo, in a deal worth $2.91B. Google is divesting itself of the handset division it purchased for $12.5B in 2011, but it will keep some of the assets — including patents.
“Google will maintain ownership of the vast majority of the Motorola Mobility patent portfolio, including current patent applications and invention disclosures,” says Motorola Mobility CEO Dennis Woodside. “As part of its ongoing relationship with Google, Lenovo will receive a license to this rich portfolio of patents and other intellectual property. Additionally Lenovo will receive over 2,000 patent assets, as well as the Motorola Mobility brand and trademark portfolio.”
The article goes on to break down just how much Google is losing in the sale to Lenovo:
"Google sold off several aspects of its initial Motorola purchase including its cable box business. And it managed to leverage the patents — which Google valued at $5.5B — to at least some positive outcome. So, while the monetary ‘wins’ or ‘losses’ here are one for the bean counters to figure out, the strategic victories for Google may actually be fairly strong. According to some maths from analyst Benedict Evans, Google’s total outlay may have been closer to $7.15B than $12B — the divestitures, retention of patents and the sale price would cut the plain monetary loss down further to under $2B."
An acquisition of 2B to protect the android business and 80%+ market share in the smartphone industry? Welcome to the acquisition solely executed for Intellectual Property.
What's a possible equivalent in your industry?