In acquisitions, especially of start-up companies or early stage companies, the valuation and assessment of the intellectual property portfolio of the company to be acquired is generally of considerable, if not, paramount, importance. The review of patents, trademarks and copyrights is a sine qua non for buying a company or a product line. Also critical in this analysis is understanding the trade secret information and know-how which the acquired company possesses and the key employees in possession of the trade secret and know-how information.

Depending upon the sophistication of technology, it is rare that the intellectual property contains all the information necessary to use the technology in a turn-key manner. Consequently, a review of the employment contracts of the key employees will also allow an assessment of the risk of the loss or compromise of this information should one or more of the key employees decide not to remain after the acquisition.

An acquiring company may wish to minimize an upfront cost if there is intellectual property but no product sales. A valuation model may be applied to determine a value for the intellectual property profile (valuation model ). The acquiring company can expect to pay considerably more if less money is paid in advance, but usually such payment is made contingent upon the sale of products which are protected by the intellectual property portfolio. An outright purchase of the intellectual property portfolio is generally made at a significant discount to the total for a running royalty based upon the assessment of risk factors including, most importantly, the validity of the patent covering the products to be acquired.