Selling outright

Competencies required

The outright sale strategy generally involves no ongoing involvement by the seller with the innovation or purchaser. Accordingly, there are no special competencies required to execute the strategy (apart from good marketing and negotiating skills during the sale and purchase phase).

Resource investment

As the innovation is already produced, and there is no ongoing involvement in manufacture or marketing, there is little resource required to execute the strategy.

IP protection

Generally, a robust IP portfolio will be required to attract a buyer (there must be something worth buying!). For the buyer, purchasing the IP is a relatively high risk endeavour, particularly if the product is yet to be manufactured and sold on a commercial basis, and the buyer is paying a lump sum. Without strong IP protection, the risk of product or market failure may be unacceptable.

Having said that, significant sums are often paid for the transfer of know-how between companies, where the only protection is confidentiality agreements and secrecy protocols.

Competitive landscape

The competitive landscape may have little impact on whether an outright sale is a feasible commercialisation option (unless of course there is no one to purchase the IP!).

Where the competition comprises large aggressive companies with products in the maturity or decline stage of their product life cycle, then an outright sale may be a good option to pursue. If two of these companies can be played off against each other, then the IP may attract a relatively high sale price (as it will include a strategic premium).

Risk and return

The primary risk faced by a seller in an outright sale is undervaluing the IP. However, that risk can be mitigated to an extent by using a combination of a lump sum payment together with a small ongoing royalty based on performance of the IP. Variations of this tactic can also be used to minimise the risk faced by the purchaser of the IP.

The potential return from an outright sale will depend on many factors. Theoretically, the return can be the same as licensing the IP, assuming the valuation (based on the net present value of future income stream) is sound.

  • Potential lump sum payment with little risk
  • No ongoing involvement in commercialisation
  • Risk of undervaluing
  • Limited ability to participate in upside of blockbuster technology
  • Loss of control

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