The IP formula of a merger

In my current round of discussions with a client, he asked me to formulate not only a legal document but also a mathematical prescription to explain his particular boss the importance of measuring their intellectual assets. I hope it helps a few more who read it here. When two firms come together to form a single entity with special focus on merging their assets and liabilities – a business merger is born. If the two entities are equal (in their non-IP value/worth), mostly, an exchange of stocks will take place. The acquirer will issue new shares to the shareholders of the target firm at a ratio. The target’s shares get replaced by the acquirer’s shares. The combined values of the two firms after the merger should be mathematically equal to their values had they been combined before the merger. Now, since we know that because the ratio of the exchange of shares will not be in harmony (the target’s shareholders are paid premiums) with the value of the firms with respect to each other, the individual values of the firms will be different than their values before the merger. One major spin off which emerge out of a merger, I call the ‘BIPE (The benefit of IP exchange). It is the total of the benefits the new entity gains post merger when the intellectual assets have been combined. Abandoning the other ‘share value effecting’ aspects of such a transaction, lets focus on the BIPE for the purposes of this brief. The pre merger price (in relative values) of the share for all the shareholders will always be equal to the post merger prices, if the following can be equated by putting a certain value for the BIPE –

Post merger value of a share = (combined premerger value + BIPE) / post merger no. of shares = post merger value of shares.

If the firms can’t meet the BIPE value so as to make the equations work, then it is indeed a bad merger.

US Open…takes off

US open is happening. And it is happening 6.5 miles (unerringly) from my house, at Arthur Ashe. I would love to be there. I’d love to be there not only to watch my favorite players in action, but also to see how they manage to deliberate on the game with a plane taking off their heads every ten minutes (La Guardia is next block). I do not have the tickets. Neither am I expecting someone to gift one. The subject matter looks out for an elucidation. Anyone?

Civil liberties…hmm..good joke.

This date in 1988, The Civil Liberties Act was signed. I consider this legislation to be the one of the most humane the world has seen.

Other than recognizing the wrong done during the World War II on the US citizens and the people of Japanese origin residing permanently in US, it put forward an apology, among other things it stood for. However, it categorically stated that it was intended to: ‘discourage the occurrence of similar injustices and violations of civil liberties in near future’. Many pieces of legislations, inspired by this Act of 1988 were put on paper all over. But what is needed is ‘action’. And India needs a big slice of it. The rise of Thakre, the treatment to Nasrin, the state comatose after 84 and Godhra are a few examples which confirm it has always meant nothing to us. Justice Tarkunde was just joking when he said “I believe in a country of mass poverty and ignorance, like India, humanism must take a radical form. It must be concerned with developing a movement aimed at spreading the humanist-democratic values of freedom, rationalism, and secular morality among the people so that they can take the necessary initiatives for the elimination of poverty and removal of mass ignorance”. Where is the action?

Shame

Hundreds died at Naina Devi. Crazy dash for the deity or a landslide rumor? Undeniably another managerial task gone out of line. Who all believed that the place has wonderful control systems put in place by the state? Who all believed that God lives in the stones? Who all believed that thousands of people gathering on constricted mountainous tracks can never reduce to this fate? I am not sure of the adults who passed away, however I am certain that none of the children who died believed this.  As much as, they never would have believed in God, if not for their parents who, for the love of God took them to the exceptionally packed place. We are all in sorrow. But it’s time to also be in shame. 

Where do they go?

A few of us know Indian governmental hospitals. And fewer know how they work. What we doubtlessly don’t know is where the majority of the patients go when they have been released before they are well enough to take care of themselves, for they have a house to go… is not certain. Shelters in India – they don’t exist. A latest L.A ordinance makes it an offense for hospitals to transfer a patient to anywhere other than his or her home without a sanction in black and white. The whole world needs this law. India needs this without delay. We don’t want sick on our roads. We want them under roofs and that too within law.

Pollute but sign

India, China and a few other developing nations cold-shouldered the G-8 Summit. The post-Kyoto showdown stands shatterproof. After the Hokkaido summit, this was a big opening. Except, we didn’t even inched. There seems only one leeway now – make a legal agreement without obligatory emission objectives. Besides?

The cricketing best?

So Sunil Gavaskar says that Tendulkar is a better cricketer than Bradman was. Afterall, he beat Bradman’s century record. Everything is about numbers. I agree. But sometimes I don’t like to. Or don’t want to. And this is one of those times. Is Tendulkar bigger than the man himself, I mean Sir M. Gavaskar. Catching in the slip, late brushing and you asked what, he just produced everything which I and my pals tried duplicating for years in the narrow cricketing lanes of Radhey Puri. Cricket to us was all about technique. And he was the man of it. Swing. Hook. Drop. Or duck. No one did it better, while I admit that Sir Vivian Richards was a close runner. Even knowing well that Tendulkar is the contemporary best, I maintain that the joy the Sr. little man’s game gave was more profound than the Jr.’s. And as for Sir. Bradman, I’d have to watch videos, if there are any.

Making money…patents or not

Ranbaxy is a generic drug maker. Daiichi Sankyo is not. They both have completely different industry representations.

The drug making giants will face huge losses between 2010 and 2012, when many of world’s hottest selling and patent protected medicines lose their IP and fakes start to skirt the international marketplace top- speed.

In this rests the logic of Daiichi proffering to Ranbaxy. Good move? Yes, only if exploits like these really bring the prices down, which in the light of enormous size differences between the large companies and generic drug makers looks difficult. In spite of everything, what rule the marketplace are economies of scales.

Red gone…time to write in black

Now with the Left powers gone, and if the Congress hangs on to rule, billions of dollars of disinvestments could bridge the multi-billion dollar budget deficits, ultimately safeguarding consumers from the rising gas prices and inflation, to a big degree. And the good news could be, if he has the guts, that the Indian PM ensues on with the privatization efforts much before the elections on May or whenever. With the red forces moving out, other chief strategy plans like permitting outsiders to invest in the Indian retail et cetera also can see some action now.

Spain… all the way

Changing the guard at the Wimbledon, Nadal beat Federer in almost 4 and a half hours of hard hitting play in just about total darkness. Though I could just see about the last 35 minutes of play I believe I saw the best moments in this Wimbledon history’s longest final match ever. Though the Spaniard is the first man to win the French Open and Wimbledon end-to-end ever since Bjorn Borg did it in 1980, what makes the man special is when while lifting the cup he goes on say that Federer is the best, in victory or in defeat.

Spain winning the Euro 2008 and now Nadal capturing this unforgettable moment for his country, I wish I was born in Spain.