AN INSIDER LOOK AT INTELLECTUAL PROPERTY IN M&A

Intellectual property (IP) has long been a key component in M&A deals. Company owners view IP as a critical part of their company’s value (some even seek to develop innovative or unique IP in order to bolster value) while buyers will often target companies primarily (or purely) to gain access to their valuable IP.

Perhaps the clearest indication of the value IP has is in distressed transactions. Many UK SMEs continue to face significant funding gaps, meaning that even innovative startups have gone to the wall over recent years. When this happens, administrators are quick to advertise the opportunity to acquire IP and a scramble to win the bidding typically ensues.

However, IP can also significantly complicate an M&A transaction, making the process more onerous, even if the outcome is more lucrative for both parties. As we outlined in our buyer’s guide to intellectual property considerations, everything from ownership and licence agreements to compliance and tax implications need to be considered when acquiring IP assets.

To provide an insider’s view on the matter, Business Sale Report spoke to Meera Shah, Head of M&A at accountancy and advisory firm Buzzacott, which has extensive experience working on M&A transactions involving IP-rich technical businesses.

Meera provided insights on key issues including how intellectual property affects company valuations, due diligence considerations involving early-stage tech IP and the UK industries in which IP is a particularly prevalent factor in M&A.

IP as a value driver

In an era defined by tech and innovation, IP has become one of the most important value drivers in M&A deals, with assets such as patents, software, proprietary technology and brands often taking precedence over physical assets.

For buyers targeting intellectual property assets via M&A, the IP represents the target company’s true competitive advantage and is what they are aiming to leverage to secure growth and value from the transaction.

Of course, IP is a more prevalent factor in valuations in some sectors than others. Meera states that UK-headquartered SMEs that Buzzacott typically works with are often within industries such as tech, media or business services, where “it is quite common for there to be some IP value to be uncovered.”

“This looks different in other sectors such as say manufacturing”, Meera adds, “where the value lies more in say the manufacturing capabilities and sometimes the brand name which consumers are drawn to.”

When it comes to IP-rich technical businesses, Meera explains, IP is “pivotal in demonstrating the unique characteristics of the business versus its competitors” and Buzzacott will therefore “always try to help draw out any IP in businesses we are selling for this reason.”

To demonstrate this, Meera cites the 2022 acquisition of Leesman, a world leader in measuring and analysing employee workplace experiences, by US-based end-to-end tenant workplace experience platform HqO.

Buzzacott advised Leesman on the transaction and Meera explains that the company’s unique IP formed a crucial part of the deal. Leesman, Meera says, “had built up a dataset over 11 years with survey data benchmark on the same consistent basis – something which its peers could not claim to have.”

In a press release discussing the deal, Buzzacott described the company’s offering in greater detail: “Leesman is a truly one-of-a-kind business and has gathered the world’s largest dataset on workplace experience. It pivoted and innovated during the pandemic to continue to be of critical importance to its clients in informing decisions about return to the office and the future of work”

Meera describes this IP as being seen as “hugely valuable” by potential buyers, and ultimately this was what “leveraged how buyers viewed the business beyond simply its revenue and profit generation capabilities.”

Following the acquisition, HqO CEO Chase Garbarino said that the Leesman Index was something that had been “transforming how organisations benchmark their workplace experience for more than a decade, helping some of the biggest brands in the world improve their employee experience through their rich dataset and proprietary methodologies.”

How can IP be valued?

It can understandably be far harder to accurately value intangible assets than it is to value physical assets, such as plant, machinery and property. This is maybe even more pertinent when it comes to an intangible asset like intellectual property.

As we’ve mentioned, IP will always attract a high valuation in M&A transactions in which it forms a key part, however there is still scope for significant divergence in the value that the vendor and any potential buyers will put on it.

For an owner at a company that has developed valuable IP, their pride in what they’ve developed and their eagerness to not undersell it when the business comes to market means they are almost certain to put an absolute premium on it, arguing that it is a unique proposition and that demand will be high.

Buyers will not necessarily view the situation in the same light. While they may agree that the IP is valuable, has high potential and may even be completely unique, they will also be unsentimental about its development and attuned to the potential risks (particularly if it is early-stage IP).

Something that has proven to be a particularly stubborn hurdle to a revival in UK dealmaking over recent years has been valuation gaps between vendors and buyers. When we asked whether targeting an IP-rich business made it easier or harder to bridge valuation gaps, Meera stated that the situation is complex.

“Beauty really is in the eye of the beholder,” she explained, “ and it typically depends on what the buyer’s strategy is, and what they do and are willing to place value on.”

Buzzacott has been involved in some deals in sectors being rapidly changed by AI and other technology where buyers prefer to use off the shelf solutions rather than develop IP (something that is comparatively costly and time consuming), whereas the vendor “has developed their own internal unique tech.”

Demonstrating the difficulties that can arise from divergent buyer and seller valuations of IP, Meera says that, despite sellers having their own views on the value of unique IP, the buyer simply may not place value on it.

In order to prevent valuation disputes that could derail a potential deal, then, it is important for advisers working on M&A deals involving IP to approach the issue in as structured, objective and consistent a manner as possible.

The technical approach for valuing IP is typically carried out in one of two ways: Firstly, the costs it would incur to recreate the IP; Secondly, the cash flows that the vendor generates from the IP.

Meera does, however, draw a distinction between valuing IP and how it is ultimately priced in a market transaction, saying that this varies from deal to deal and, ultimately, “tends to be implicit within the premium a buyer is willing to pay, typically driving a higher multiple.”

If the IP is generating annual recurring revenue (ARR), for example, this is likely to result in a deal ultimately reflecting a revenue-based valuation, rather than a valuation made using its EBITDA.

IP in due diligence

In our insight on acquiring intellectual property assets, we examined in-depth the wide range of due diligence concerns that are involved in IP acquisitions. In particular, the often onerous work involved in determining ownership and structuring asset-based transactions.

In order to focus on a more specific area of due diligence as it relates to IP, we asked Meera about the challenges and complications that can arise when conducting due diligence on an IP-rich technical business.

Unsurprisingly, Meera states that early tech due diligence has become increasingly important in acquisitions in which the IP is pure tech. In this instance, she says, “the concept of tech debt is crucial for a buyer/ investor to understand.”

Tech debt, in brief, refers to the future cost incurred by choosing solutions seen as being quicker or more expedient during software development (but which may prove to be suboptimal), as opposed to developing more effective, long-term solutions.

Should early stage tech due diligence reveal that the acquisition of the IP in consideration will likely deliver a suboptimal solution, then the deal will typically not advance past this point. Simply put, if a business targeted for its tech offering doesn’t have strong IP, it is not worth acquiring.

In a recent deal that Buzzacott had insight into, the buyer was “planning to conduct high-level tech DD first in a staged DD process”, as that was their “primary reason for buying the business”. If the IP did not meet the buyer’s expectations in terms of quality and calibre, then they would not progress onto financial, tax and legal due diligence.

Is IP encouraging inbound UK M&A?

Despite the relatively average levels of M&A activity the UK has experienced over the past three or so years, one consistent bright spot in terms of dealmaking has been inbound activity from foreign buyers.

Overseas buyers, particularly from the US, have been targeting UK companies across a wide range of sectors, drawn in by attractive valuations, possibilities to build scale in fragmented or emerging industries and by the UK’s world-leading status in industries such as healthcare, fintech and media.

Many of the sectors seemingly most attractive to overseas buyers are ones populated by technical businesses and innovative startups, meaning it is natural to wonder whether intellectual property is one of the major draws for foreign investors targeting UK companies.

When we asked Meera for her thoughts, she referred to M&A in the professional services sector – one of the industries that has been most resilient in terms of dealmaking.

“The UK is certainly home to a strong professional services industry, whether that is data consulting firms, FinTech companies or even accounting practices. Many of these are IP-rich businesses, and this could be considered one of the reasons for the appeal from overseas buyers.”

Speaking more generally, Meera referred to the UK market’s support system for innovation, which includes support and grant funding for start-ups and scale-ups, R&D tax credits and share incentives. This contributes to an environment that generally supports the development of valuable IP, something sure to attract overseas investors targeting innovative businesses.

Innovative IP in distressed deals highlights funding issues

Despite such support schemes and grant funding, financing issues continue to be something that affects small and medium-sized businesses across the UK. As of 2025, the British Bank estimates the UK SME funding gap to stand at up to £65 billion.

This funding gap means that even innovative startups with potentially transformative IP are at risk of not having the funds required to continue trading. Should they subsequently collapse, that valuable IP becomes available at bargain prices.

Founded in 2017, AMLo Biosciences was a life sciences spinout from Newcastle University that specialised in prognostic tests for early-stage skin cancers, typically melanomas. Operating in both the UK and US, the company had previously raised over £4 million in funding from investors including the North East Innovation Fund and Innovate UK.

However, when the company sought new investment in early 2025, funding could not be secured in the required timeframe and Grant Thornton and Tax LLP were engaged to undertake an accelerated sale of the business. Despite “tangible interest” in a deal, this could be concluded in time and the company fell into administration and ceased trading.

Joint administrators from Grant Thornton were appointed in July 2025 and began “exploring a sale of the company’s assets, including significant intellectual property”. In AMLo Biosciences’ accounts for the year ending November 30 2024, its total assets were valued at around £1.1 million, but, in a further sign of its financial struggles, net liabilities exceeded £620,000.

More recently, cleantech specialist Carbon8 Systems, which had developed a patented process for capturing CO2 emissions and converting them into carbon-negative aggregates, fell into administration due to cashflow challenges encountered while seeking investment.

Despite the company’s innovative offering, it had failed to secure investment within the required timeframe, resulting in the appointment of joint administrators and the closing of its sites and equipment.

Quantuma Managing Director and joint administrator Chris Newell said that it was “always difficult to see a company with such innovative IP be placed into administration.” Newell added that the joint administrators expect “strong appeal in the assets”, urging any parties interested in acquiring the IP to make contact.

In accounts for the year to December 31 2024, Carbon8 Systems’ fixed assets were valued at around £3.8 million and current assets at approximately £646,000. However, its net liabilities exceeded £1.1 million.

As frustrating as it is to see such clearly talented, innovative small businesses collapse due to an inability to secure funding, the silver lining is that these assets (and often the teams that developed them) are highly attractive to potential buyers, meaning that all of that research and work rarely goes to waste.

For buyers, such situations present rare opportunities to acquire innovative, cutting-edge and potentially transformative IP assets at a fraction of the cost and without investing a huge amount of time and money in research and development.

M Squared Lasers was a Glasgow-based photonics and quantum technology business that had built an international reputation and customer base with its award-winning laser platforms and quantum technologies.

M Squared supplied markets in the UK, Europe, Asia and the US and its products were used by customers ranging from scientists and universities to commercial organisations and in sectors including physics and life sciences.

Despite this global standing and industry leading position, M Squared was not immune from the many challenges facing specialised technical businesses. It was hit hard by global headwinds including the aftermath of the COVID-19 pandemic, supply chain disruption due to the war in Ukraine and slowing orders from key customers.

These factors left the company in a perilous financial state and efforts to secure new investment were unsuccessful, with administrators from Interpath Advisory appointed in August 2025. Upon their appointment, the administrators said they were seeking a buyer for M Squared’s assets, including a suite of “highly specialised” IP, work-in-progress, stock and customer relationships.

This process unsurprisingly attracted several offers, with joint administrator Geoff Jacobs saying that the IP assets “in particular attracted interest from a variety of parties.” Novacene Photonics was ultimately granted preferred bidder status, securing the acquisition of M Squared’s IP and certain other assets in November 2025.

Key takeaway for exiting owners – Don’t risk unrealised IP value

When exiting a business, developed IP can be one of an owner’s most valuable assets. If the IP is particularly unique or the owner thinks it has high enough potential, realising its value may even be one of their core reasons for exiting.

However, as we’ve touched on, just because an owner sees the value in their IP, this does not necessarily mean that the market will agree. Meera warns that taking a business to market when IP is relatively new will often mean that its value has not been sufficiently realised in order for the purchase price to reflect its potential worth. Without a track record of success, the buyer is likely to focus more on the risk of investing in unproven IP.

Therefore, the key for business owners is to ensure that they have developed their IP to a point where its value is evident and potential buyers are convinced that it will deliver a return on investment. As in any exit scenario, owners will have to focus on taking the time to build demonstrable value if they want to fully realise the worth they see in their IP.

There is also a lesson here for buyers seeking to acquire innovative IP. While you may see the potential of early-stage IP assets and be willing to invest in that, this does not guarantee that the hoped-for return on investment will be realised.

While investing in early-stage IP is totally viable, buyers should be wary of the risk profile as success is not guaranteed. For business owners seeking to derive reliable, long-term returns without waiting for IP to be fully developed, it may be more advisable to target more mature assets with a track record of value creation.

Information take from Business Sale Report: https://www.business-sale.com/insights/for-buyers/an-insider-look-at-intellectual-property-in-ma-228510

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