From an economic perspective, the bankruptcy process is a set of laws providing for the regulated transfer of the debtor’s assets to creditors in order to settle outstanding claims. Consequently, the debtor’s assets and liabilities must be valued, in a mutually and legally satisfactory way, to arrive at the appropriate transfer ratio between the parties. This is an administrative process, not a freely negotiated transaction in a competitive market. Intangible assets, furthermore, are typically unique and have few, if any, organized secondary markets that can provide arm’s length prices to establish values as they do for financial assets. IPmetrics’ professionals have a vast base of experience in valuing and providing analysis and advice regarding intellectual property and intangible assets in a bankruptcy setting.
The bankruptcy valuation process must be carried out in the context of competing interests, yet with recognition that there might be a compulsion to sell. All relevant data must also be taken into consideration. In the 21st Century, intellectual property has emerged as a significant asset class in the context of bankruptcy, one that can either settle an increasing proportion of outstanding claims or, in some cases, support the possibility of restructuring the original business.
A sale according to §363 of the bankruptcy code essentially generates cash for the debtor’s estate in an expedited fashion. This is due to the removal of any liens or encumbrances against the assets being sold, which streamlines the change of title procedures for any potential acquirers. An accurate triage and valuation process conducted on assets that may be suitable for this process will provide decision makers with valuable information regarding expected sales proceeds and viability of for-sale selections beforehand.
Once a restructuring plan has been conceived, it is prudent to assess the relevant assets in the context of their intended use going forward. This is especially true for intellectual property and intangible assets. Having knowledge of the expected value of particular assets resulting from restructured, recapitalized and revitalized assets provides a sound basis for the effective management of the bankruptcy process.
IPmetrics' Bankruptcy Valuation Experience document available here.