While recent news stories on deal flow and employment prospects at investment banks is nothing short of depressing, a niche market of patent sales are growing faster than traditional M&A activities. Investment banks that specialize in patent sales include Lazard, Evercore and Barclays, according to an article by Bloomberg Businessweek:
While global deal volume is down 24 percent this year as of July 18, patent deals have jumped in the past 12 months to $18.8 billion from $450 million the year before, according to data compiled by Bloomberg.
For Evercore Partners:
Patents will represent as much as 20 percent of Evercore’s technology business this year, up from 5 percent a year ago, according to Naveen Nataraj, a technology banker.
Tech companies don't typically last long due to creative destruction, and larger tech firms are becoming more aggressive to acquire patents from fallen companies to protect themselves. As long as new tech companies keep churning out with the advent of mobile devices and social networks, patent sales will remain a growing business for investment banks, at least in my opinion. A few recent deals are mentioned by Bloomberg including Motorola's $12.5 billion patent portfolio sale to Google, and Nortel Networks to few large tech firms in a last ditch effort to retrieve some value from bankruptcy.
Some recent activities include:
- AOL $1 billion patent sale to Microsoft
- Kodak has hired Lazard to sell its assets to shrink its business
If anyone is working in patent sales, would you share some insight? What's the best way to get into this growing M&A segment? Do you think this niche will be a growing part of other larger investment banks?
Best way to get in is to go work for a patent troll, you can make serious money. Best background is patent law (obviously), but they'll take people with good tech backgrounds, PhDs or sometimes MBAs / biz backgrounds for things like market evaluation. I got recruited to work at a major patent troll several years ago and interviewed but decided that is not my cup of tea. Btw, they all call themselves "patent portfolio companies" or some rubbish, but any non-operational company that hoards patents with no intent to develop products is a troll in my book. This industry will boom for the next decade at least most likely.
Patent M&A is a sideshow. There are small shops like Ocean Tomo that focus on it, but my understanding is that it often comes down to a direct negotiation between the two parties. Banks get involved when it becomes part of a larger strategic process, such as Kodak.
The real money is in working for a patent troll like ACTG. The way they are structured is actually similar to a HF. They have the equivalent of portfolio managers who have teams of engineers working under them to evaluate various patents. When they come across something that is mispriced, they'll snap it up through a revenue sharing contract or straight acquisition, and then monetize it through litigation and thinly-veiled threats. Compensation is obviously based on revenue generation. These folks generally come from the IP department at large corporations.
Do you have a clue as to why the stock ACTG sold off so much after earnings?
Great post! Information like this is very useful to someone like me who is interested breaking into this industry.
Thanks! The comments are very insightful too. Hope you break in!
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