Due to the rapid growth of technology, due diligence of intellectual property has become an integral part of modern M&A transactions. Intellectual property ownership is becoming a key reason to initiate M&A deals in Peru to achieve business growth goals.
In the case of large transactions, information technology is undoubtedly a key factor in the success of a merger or acquisition.
This article covers the main aspects of IP due diligence that must be properly performed if you decide to enter into an M&A deal in Peru.
Typical due diligence areas
Preparation for an M&A transaction must begin with a comprehensive assessment and audit of the target company in all areas – from financial performance and strategy to personnel compliance, corporate culture, and – special attention – to legal aspects.
The consequences of superficial due diligence checks and evaluations can result in a significant increase in the cost and complexity of the merger process.
Due diligence of technological M&A in Peru attaches great importance to intellectual property rights (IPR). Priority is given to the review of employment agreements so that all work performed by technology specialists is carried out in the direct interest of the employer.
If outsourced specialists were invited to perform certain work, then it is important to carefully check the third-party agreements to make sure that the target company fully owns all development rights.
Due diligence scope
Regardless of the purpose of due diligence, the research includes corporate aspects of the company's activities, which are studied with varying degrees of detail. Of course, no matter what period of activity is checked, the purpose of the study is not to identify all possible violations, but to identify those that may entail significant negative consequences at the present time.
Transactions for the acquisition of shares in Peru imply that during the due diligence procedure, issues related to corporate law, taxes, labor relations, intellectual property, real estate, litigation, insurance will be considered.
You should also check if the vendor is following safety protocols, critical operating rules. The seller has to answer questions such as whether employees are trained on data access policies (for example, passwords), whether confidentiality agreements have been drawn up with employees and service providers, etc.
It is equally important to be very clear about your IT integration strategy, including managing the transition phase, effectively estimating time and costs, and planning the required capacity. And, of course, for the successful implementation of the chosen path, it is necessary to effectively carry out the transition to the target IT architecture.
Due diligence of assets in Peru includes verification of the following information:
- Certificate of intellectual property rights, employment contract or service agreement, if the IP is owned by the company;
- terms of registration;
- proof of use;
- payment of legal annual fees, if applicable;
- registration of pledge rights.
Pledge and security of intellectual property may be provided in accordance with Peruvian law. The deposit is provided in court. These are precautions, provided that there are sufficient grounds for such a claim by the plaintiff. After receiving the pledge, the court decides to register it in the Register of movable assets and contracts. Only written agreements are valid.
IPR transmission in Peru
Intellectual property acquisitions often raise issues related to ownership, data and brand protection, and the need to rationalize and consolidate assets after a merger.
There are no legal requirements for the transfer of IP and technology, and there are no regulatory differences between exclusive and non-exclusive licenses. If you are interested in obtaining a license to use intellectual property in Peru, please note that the contracts provide a limitation on sublicensing IPR, unless the licensor has given written permission. The contract is registered in the Register of Movable Assets and Contracts.
Due diligence of software in Peru
When it comes to conducting technology mergers and acquisitions in Peru, technical analysis of IP assets is essential. A technical overview includes having access to the source code and the ability to run various tests, which may involve highlighting different areas of the code or platform to test its capacity and growth potential.
Providing an integrated approach to managing business strategies, processes, product lines, information technology, and people during an M&A in Peru can significantly reduce the risks and costs of both the first and subsequent mergers.
It is very important that this structure includes people with knowledge of the merged companies, integration skills gained from the experience of similar transactions, as well as sustained senior management support.
The greatest risk for companies is relationships with third parties or business partners. It is important to evaluate existing information about third parties, to identify possible unforeseen circumstances if you plan to start a merger and acquisition of Peruvian companies.
The specialists of our company conduct due diligence consultations for technological M&A in Peru for clients. Please reach out to us by filling the feedback form.