mercredi, mai 25, 2011

New Zealand: Brand protection and the perfect exit strategy

Contributed by A J Park


Creating a brand involves a lot of hard work, but it pays off when potential acquirers are lining up to buy the business. Brand protection is vital when executing the perfect exit strategy.

It takes confidence and effort to run a successful business centred around an exclusive, sought-after product or service. Having a potentially money-making idea is the first big step, but an entrepreneur still has to create a business plan involving the idea, establish a business to commercialise it and spend a number of years building up equity and goodwill in the business.

Determining the perfect exit strategy is difficult. It depends on a number of factors and, most importantly, timing - a luxury over which entrepreneurs and others generally have little control. However, New Zealand has seen a number of significant success stories, including the sales of:

  • Trade Me to Fairfax Media;
  • Kathmandu to private equity interests;
  • Wither Hills to Lion Nathan;
  • 42 Below to Bacardi;
  • the Kim Crawford brand to Vincor of Canada;
  • the La Bonne Cuisine dips business to Heinz Wattie's; and
  • the Trilogy brand of natural skincare to Ecoya.

In each case, a company had an exclusive, successful branded product to which it devoted a lot of effort, resulting in something tangible - as well as intangible - that an acquirer could not resist. The vendors deserved to reap the rewards for their efforts. However, reaching a point at which they could sell to an interested party meant having a product that translated into value, exclusivity and quality. They had to create a brand that could be converted into a legacy, so that it could be continued under different ownership, even once the original creators had exited.

The much-used words 'value', 'exclusivity', 'quality', 'equity' and 'goodwill' all refer to something intangible. It is creativity that gives immense value to an organisation's goodwill - in other words, its intellectual property. In each of these recent examples, the intellectual property is closely connected to a strong brand name:

  • TRADE ME for online trading;
  • KATHMANDU for outdoor equipment and clothing;
  • WITHER HILLS for wine;
  • 42 BELOW for vodka;
  • LA BONNE CUISINE for dips;
  • KIM CRAWFORD for wine; and
  • TRILOGY for natural skincare.

All of these brand names were registered as trademarks, not only in New Zealand, but also in the products' intended export markets.

Obtaining trademark protection in a number of jurisdictions can require significant investment. Registration gives a brand owner exclusive rights to use their trademark without concerns. They can also enforce the rights granted to them by registration to prevent unauthorised parties from using the same or similar names in connection with the particular products or services for which the trademarks were registered.

Registration also means that when prospective purchasers carry out due diligence, they know that they would have exclusivity in the countries where the mark was registered. The certainty of being able to carry on business using such a trademark would be a significant factor in the price paid for the company and its assets, both tangible and intangible.

Entrepreneurs with a creative product should prepare correctly from the outset, even if the prospect of taking the world by storm seems remote at first. They should ensure that they have registered their brand in all countries of interest; whenever a new market is established, the brand should be registered in that country. It pays to have an extensive IP portfolio and to ensure that it is fully protected.

Once a creative product is established, its creators should be ready to sell out and realise the profit from their hard work. They can maximise their chances by being aware of potential opportunities and surrounding themselves with experienced businesspeople and mentors. For example, the owners of the Trilogy skincare brand formed an advisory board that comprised a former chief executive of one of their distributors and an accountant, to which they added a lawyer and another accountant. Many businesspeople who have already found their own exit strategy may be willing to pass on the benefit of their experience in an advisory or mentoring capacity.

For further information on this topic please contact John Hackett at A J Park by telephone (+64 9 356 6996), fax (+64 9 356 6990) or email (john.hackett@ajpark.com).