The 100 Billion KRW Deal at Risk
Company S, a long-time client of Sarang IP and a rising star in the K-Beauty sector, was on the verge of a massive milestone. A prominent Private Equity Fund (PEF) had agreed to acquire the company in a deal valued at over 100 Billion KRW (approx. $75M USD).
However, during the due diligence phase, a critical “hidden risk” emerged.
Like many founder-led startups in Korea, the CEO had registered the company’s core intellectual property—47 trademarks across Korea, China, the US, Vietnam, Taiwan, and Canada—in his personal name, not the corporate name.
For the PEF, this was a deal-breaker. To acquire the company safely, the trademarks had to be transferred from the CEO to the corporation before the equity sale. But at what price?
- If the price was too high, it would be a breach of trust (embezzlement).
- If the price was too low, it would be a tax liability (gift tax issues).
The deal hinged on a fair, defensible, and legally sound Trademark Valuation.
The Solution: Financial Engineering meets Legal Expertise
Sarang IP stepped in not just as patent attorneys, but as valuation experts. We needed to determine the objective market value of these 47 assets to facilitate a clean transfer.
We employed advanced valuation methodologies recognized by tax authorities and courts:
- Discounted Cash Flow (DCF): Projecting the future revenue attributable specifically to these brands.
- Relief-from-Royalty Method: Calculating the value based on the hypothetical royalty payments the company is “relieved” from paying by owning the marks.
We meticulously analyzed sales data across all global territories (US, Vietnam, etc.) and applied specific risk rates for each market.
The Result: A 915 Million KRW Valuation
After a rigorous analysis, Sarang IP concluded that the fair market value of the trademark portfolio was 915 Million KRW (approx. $680,000 USD).
We produced a comprehensive Trademark Valuation Report that satisfied legal, accounting, and tax standards.
- For the CEO: He received a fair, lump-sum payment of nearly 1 billion KRW for the assets he created.
- For the Company: It secured full legal ownership of its brand, cleaning up the balance sheet.
- For the PEF: The “CEO Risk” was eliminated, clearing the path for the acquisition.
Armed with our report, the CEO successfully transferred the trademarks and subsequently sold 2/3 of his equity to the Private Equity Fund. The M&A deal closed successfully without a hitch.
Conclusion
Intellectual Property is not just a legal right; it is a financial asset. In high-stakes M&A, IPOs, or investment rounds, the value of a trademark is just as important as its registration.
Sarang IP provides more than just prosecution services. We combine legal expertise with financial analysis to unlock and prove the real business value of your IP.
