Tendency towards mergers and acquisitions
- Consolidation has been the dominant trend in the IP service sector for the past couple of years and this is likely to continue
- Joint ventures between service providers in different fields are also likely to become more common
- Is investment from venture capital firms in service providers likely to continue?
One characteristic of many AI tools is that they are often developed in small, dedicated businesses. As one expert describes: “We see a lot of small projects, many of them emerging from universities. Start-ups can really accelerate development.” The CEO of an IP service provider adds: “We see a lot more start-up activity, particularly in brand protection, with nice technologies coming from different sectors, such as e-commerce.”
As another provider claims, this means that “there is a tendency towards M&A”. As we explore further in our patent service providers report, consolidation has been the dominant trend in the IP service sector for the past couple of years, following what one respondent described as a “market correction” in 2016. That consolidation is bound to continue, predicts the head of one (recently merged) IP company: “Consolidation is accelerating, and we see it following a similar path to other business process outsourcing industries. It has been slower in our industry, because there are protected professions, jurisdictional differences and generally more inertia, but in the end I expect we will have three to five big actors in the IP sector.” Endorsing this view, the head of one small service provider was clear about his goal when asked recently: “We are waiting for the right buyer and the right offer.” In addition to mergers, another might be more joint ventures between service providers in different fields. For example, Corsearch and Darts-IP have partnered on a service which brings case law data into trademark watch notices and search reports, while CompuMark and White Rabbit announced a strategic partnership in May 2018.
However, another trend is harder to predict. The past couple of years have seen some mind-blowing investments from venture capital firms in companies such as CPA, Clarivate and Corsearch. That investment has spurred growth and brought valuable expertise from outside of intellectual property, but how sustainable is it? The firms will want to see a return at some point, probably within the next five years. There may be other investors who pick up the baton, if the price is right (as CPA has experienced). However, logic suggests that at some point there will have to be another exit strategy – whether that is an IP office or an acquisition by a larger, business-focused IT or service company.