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A Singapore conglomerate received a purchase proposal for a small Jordanian startup valued at $90M, but found it difficult to locate enough information about the company.
The Singapore Company approached us in order to thoroughly examine the startup, its founders and the nature of its competitors.
The Challenge
Beyond the complexity of the international research needed, the deadline was extremely short – only three weeks.
As this was a new company, finding information through open sources and unique databases proved difficult. However, our team was able to locate its intellectual property assets (patents registered by the company) and map the business and employment past of its founders, including partners and former employers.
The Catch
After examining the depths of the patent, our team discovered that it was only in the preliminary stages of filing for registration and was not yet approved.
Our experts then compared the patent application to existing patents of a major competitor in the same field.
They concluded that the chances of this startup’s patent application of being accepted were less than 50% and that the technology they offer is ineffective and already included in a competitor’s patent.
The Scam
Our field agents met with the startup founders former employers, as well as former and current partners.
During these conversations our team uncovered that the two founders were in fact serial patent developers in various fields (meaning – lack specific field expertise).
Their method of operation is simply patent registration followed by attempts to sell to companies in the field for millions of dollars.
As a final stage of the project, we uncovered that our client’s main competitor was in the process of formal negotiations with the Jordanian startup.
The Silver Lining
In addition to determining for our client that this startup was not a viable investment, this information helped them build an effective strategy for another project they were working on.
Ultimately, our report and research saved our client an unnecessary $90M acquisition expense and helped the company concentrate its efforts on startups that are more qualified.
Lesson Learned
Acquisitions are always a complex business situation surrounded by uncertainties and may be plagued by hidden issues that you will not see even if you conduct financial, legal and technological due-diligence.
Ensure you have all the information needed before taking any action. Especially in large companies – It is important to identify the C-levels and examine: are they really who they say they are? are they hiding any skeletons in the closet that you should know about? or perhaps they have hidden agendas you are unaware of.
