The Intellectual Property Risks And Its Preventive Measures In Cross-border Mergers And Acquisitions Of Enterprises

Since1980s, many attempts have been made in the field of cross-border mergersand acquisitions (henceforth cross-border M&A) by China’s large state-ownedenterprises. With the development of the market economy system, a great number ofprivate enterprises have also joined in this realm. Cross-border M&A of Chineseenterprises have gone through the infant stage, development stage and mature stage.Up to the present day, great progresses have been made concerning the main bodies ofthe cross-border M&A, diversities of its field, its number as well as its size ofmergers. Although many successful cases are existed, more cases of failure areconstantly occurred. Due to lack of experience and weak of risk awareness, mostChinese companies cannot properly handle the various risks existing in cross-borderM&A, especially the intellectual property risks.With the advent of knowledge economy, the value of intellectual property rightshas become increasingly prominently important for business. Cross-border M&Amay well be a shortcut to obtain the intellectual property rights. However, theintangible and non-stability of the intellectual property rights increase the intellectualproperty risks in cross-border M&A. Due to dissimilation of different nationalintellectual property systems, different enterprise intellectual property management indifferent environments, and the different intellectual property operating strategywould affect the value of intellectual property. Traditional equity or asset acquisitionsor intellectual property rights of mergers and acquisitions would confront intellectualproperty issues. Therefore, before the cross-border M&A, the enterprise shouldinvestigate the intellectual property rights of the target company as well as theexternal system environment to keep away from the risk of cross-border mergers andacquisitions that may arise during the process of cross-border M&A.The intellectual property risks of cross-border M&A are existed during itsprocess and post-merger integration stage. In pre-merger stage, companies need to gothrough a detail investigation of the intellectual property, investigating the informationof the target company intellectual property rights, legal status as well as other factorsthat affect the stability, effectiveness, and value of intellectual property, in order toprevent the risk that may arise during transaction process. Besides, because thedifferent intellectual properties have different characteristics, thus, in the process of investigate, the enterprises need not only to investigate the characteristics ofintellectual property but also the system environment of cross-border M&A. With acombination of the purpose of mergers and acquisitions, the company needs todevelop a reasonable due diligence plan which has a clear focus of investigation. Duediligence stage only to prevent the risk of intellectual property rights that may exist inthe acquisition process.The completion of the cross-border M&A process is the first step of thecross-border M&A activity, what matter most is the post-merger integration stage. Atthis stage, if the company does not handled intellectual property issues properly, thewhole process of the cross-border M&A may end up into failure. An enterprise has alarge number of intellectual property resources, but the positioning of these resourcesin the enterprise assets and their respective advantages will not be clearly identified bythe enterprise. The Boston matrix analysis could not only provide a clear idea of theintegration of corporate intellectual property resources, but also support for enterpriserestructuring, intellectual property strategy. By adopting this method, a clear pictureof the location and contraction of all the intellectual resources in the corporate assetsof the enterprise will be presented.