Tens of thousands of U.S. businesses file for bankruptcy each year. One of the decisions they have to make is whether to sell certain assets to pay creditors. However, they first need to know the value of those assets in order to make prudent business decisions. Often, misconception surrounds the term bankruptcy. Many people assume that a company that goes bankrupt must not be worth anything at all. This misconception leads to false assumptions about the worth of intangible assets. That is why it is important to choose a firm that is knowledgeable in proper IP valuation. Otherwise, the cost of improper IP valuation can be large.
Take Nortel for example. Once a large Canadian telecommunications company, Nortel filed bankruptcy in 2009. The company owned thousands of patents. Had an IP valuation analyst indicated those patents were worthless based on an incorrect analysis or based on the assumption that bankrupt assets have no value, the company would not have been able to sell its patents for $4.5 billion.
Harper Brush Works, a broom and brush company, is another example. Harper Brush Works filed for bankruptcy in 2012. The company’s bank declared the company worthless. However, the company knew its brand was worth more, so it contacted Pellegrino & Associates to provide an IP valuation on its intellectual property. The company also retained Pellegrino & Associates to testify in bankruptcy court. It turned out that Harper Brush Works was correct that its assets were valuable. In fact, the company received more than 25 bids to purchase the business, with the final bid nearly doubling the initial publicly disclosed bid. Cequent Consumer Products, an automotive aftermarket & accessories company, bought the assets of Harper Brush Works and continues to sell products under the Harper Brush Works brand—providing proof that the brand is worth something.
As shown by these examples, determining whether an asset has worth or not is an important step during bankruptcy. Great value may still exist for companies and their assets.
Contact us to learn more about our services and how we can help during bankruptcy proceedings.