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IP Asset Management and Risk Mitigation

by Hilco Streambank | Jul 31, 2014

ABLs that are lending against intangible assets have a number of tools available to promote safe and sound underwriting. A key tool is an appraisal of the intangible assets separate and apart from the enterprise in which they are currently deployed. Depending on their risk tolerance, lenders are seeking valuations based on Net Orderly Liquidation Value (NOLV) and Net Forced Liquidation Value (NFLV). The principal difference between the two standards is the compulsion of the seller, the amount of time available for the marketing and sale of the intangibles, and the level of support that will be provided to maintain asset values during the sale process. It is critical that any valuation of intangibles for asset-based lending purposes take a market based approach. Financial models, in and of themselves, might be acceptable for purchase price allocations, transfer pricing and impairment testing; however, they are not appropriate opinions upon which to make ABL underwriting decisions.