Acquired In-Process Research & Development

Mergers and acquisition pace is rapid in the high technology sector. Because most high tech companies have a high percentage of their value in intangibles such as in-process research and development (R&D), acquisitions are often at a high premium to book value. Current accounting rules require that acquired in-process R&D which has not reached technological feasibility and has no alternative use be expensed immediately at fair market value by the acquiring company.

Valuation of these intangibles requires a thorough knowledge of the R&D process and the technological environment in which a particular company operates. Technical know-how is needed to judge the feasibility of the technology and potential alternative uses. Financial and marketing expertise are necessary to project reasonable cash flow streams from potential contributions that R&D projects represent to future products.

Knowledge of the regulatory environment is also crucial to the valuation of intangibles to be expensed. The practice of valuing and writing off acquired R&D is currently under scrutiny by the SEC and the AICPA. No changes in methodology have yet been recommended, but significant valuation experience is and will be important in sustaining appropriate positions.

Our staff includes engineers, accountants, financial analysts, and attorneys who focus only on valuation issues. Our high tech industry experience, engineering, business valuation, and merger and acquisition advisory practices help us better understand the context of intangible valuation.

Please contact us for further information about our acquired in-process R&D valuation services.

For permission to reproduce or quote this brochure, please contact info@adamscapital.com.

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©Copyright 2005, Adams Capital, Inc.
Updated April 2005
Adams Capital, Inc. - Business Valuation Services
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770-432-0308 FAX 770-432-4138

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