Case study – IP value in bankruptcy

Completely liquidated, ABG and B. Riley leveraged Barneys intellectual property to enter into a deal in which Saks Fifth Avenue-owner Hudson’s Bay Co.  Is licensing the Barneys name for use in connection with its own business, hence, the “Barneys as Saks” section on the Saks site, and the redirect of the Barneys.com domain to Saks.

In much the same way as ABG and B. Riley derived value from Barneys that is distinct from its retail network and now-liquidated designer inventory, other retailers – such as Pier 1 – have “also have found buyers for their [intellectual property] assets while store operations have shuttered.”

This is a testament, Bloomberg states, to the fact that “investors increasingly see lucrative opportunities in buying bankrupt retailers’ trademarks, customer lists and other intellectual property” in lieu of the burden of their real estate portfolios and inventory, the latter of which has also been particularly plagued, as brands have struggled to sell off their stock during COVID-19 lockdown.

Citing a number of intellectual property and bankruptcy attorneys, Bloomberg’s Matthew Bultman asserts that “compared to assets like real estate and inventory, [intellectual property] is a relatively new value driver when retailers go bankrupt,” particularly as “investors have realized that reshaping brick-and-mortar retailers into online companies is doable.” (Luckily, assets can usually be parsed and auctioned separately, as indicated in the case of Sonia Rykiel.

The Paris-based brand offered bidders the option to separately acquire its intellectual property rights (namely, its various global trademark registrations, and decades of archives and product prototypes); the commercial leases for its brick-and-mortar outposts in France – from its Saint Germain flagship to a glitzy boutique in Cannes, among others; and its remaining stock of garments and accessories. The winning bidders, brothers Eric and Michael Dayan bid for all of the offerings).

While intellectual property as the key draw in a bankruptcy setting may be relatively novel, according to Bultman, it, nonetheless, appears to be part of a larger trend that will carry on for the foreseeable future.

As we noted in early 2017, a handful of retail bankruptcy deals were underscoring “the interest that the e-commerce businesses and intellectual property of even bankrupt retailers [was] attracting, and the value that they can garner” for both the companies, themselves and ultimately, the acquiring parties. This continues to be true several years later.

 

Posted in Case Studies, IP Protection