Patent evaluation mandate in the context of project financing

Mandate description

The objective of the mission was to determine the fair value of a patent relating to a compact urban turbine technology with high efficiency, intended for residential and industrial applications.

The evaluation was part of a financing and in-kind operation; it included technical, legal and financial analysis of intellectual protection and technological maturity.

Unlike other missions, the client company had a rigorous and perfectly maintained accounting, which allowed direct access to R&D and prototyping expenditure records.

Thanks to this accounting, no additional historical cost due diligence was not required to reconstruct the costs associated with patent development — the reconstruction could be carried out quickly and with a high degree of verifiability.

Key issues

The main challenges consisted of:

• estimate the economic value of a patent in the pre-industrialization phase;
• measure commercial potential and expected profitability in a market sensitive to energy policies;
• secure the valuation of the contribution in kind vis-à-vis auditors and investors;
• provide a transparent evaluation framework to provide the basis for financial and contractual negotiations.
  

Approach and results

The evaluation mobilized several complementary approaches, adapted to the context of an emerging technology:

• Royalty approach — calculation of future royalty flows related to the exploitation of the patent; the royalty rate selected was derived from a panel of sectoral comparators (licensing protocols and transactions observed on similar technologies) in order to ensure a solid market reference;
• income-based approach (updating flows) — projection of economic flows generated by marketing and industrial exploitation;
• cost approach — reconstitution of research, development and prototyping expenses, carried out directly from the accounting documents made available by the customer (no additional historical costs due diligence was necessary);
• Market approach — comparison with transactions and valuations observed in the field of micro-turbines and decentralized energies.
  
  

The cross-analysis of these methods made it possible to define a robust and well-reasoned value interval, reconciling caution and potential for profitability. The report served as a reference document for the validation of the contribution in kind by the auditors and to secure the discussion with institutional investors.