As the investment market in China is becoming more and more deregulated, the practice of acquiring a company is becoming popular. One of the most important things to determine in an acquisition is the structure of the transaction. This may be dictated by investment regulations. However, whether an asset or share purchase transaction structure is used will greatly affect how the IPR involved will be affected.
It is very important to carry out a due diligence check before following through on a merger or acquisition. The majority of enterprises have some kind of IPRs and how integral those IPRs are to the business under acquisition is necessary to know. An IPR-specific due diligence can be very useful.
Registered IPRs, such as trademarks and patents, could be simply checked with the relevant office. Not yet registered IPRs can prove difficult and in some cases, require in depth investigation of the business history, including employment contracts, confidentiality agreements and other documents that can determine the security of an IPR. When acquiring a company that has licensed its IPRs from another company, it can not be stressed enough that one must first review these license agreements to guarantee that the licensing contracts are in fact transferable.
