With Fortress set to take control of Inventergy’s patents the market has a potential new NPE on its hands 05 Jan 17
Investment giant Fortress looks set to take control of Inventergy’s patent assets following the announcement shortly before Christmas of a restructuring deal between the two. Subject to shareholder approval, and the green light from third parties, Inventergy’s patents will be transferred to a Fortress-controlled special purpose entity (SPE).
According to a December 29th release, “Fortress will have the sole discretion to make any and all decisions relating to the company’s patents and patent monetisation activities.” Inventergy has around 740 patent assets acquired from Nokia, Huawei and Panasonic in a series of three separate deals in the first half of 2014.
Like many public IP companies (PIPCOs), the NPE suffered in the glare of the public markets as its share price slumped and potential licensees indicated their willingness to drag out negotiations and engage in litigation in order to avoid taking a licence.
Fortress originally provided an $11 million package of debt financing to the NPE in October 2014. Since then the agreement between the two companies has been restructured on several occasions as Inventergy struggled to secure meaningful revenues from its monetisation efforts. Under the terms of the restructuring agreement, assuming that the SPE sees some success, Nokia, Huawei and Panasonic should all get a return on the portfolios they originally transferred to Inventergy.
As the capital markets have become an increasingly unattractive forum for PIPCOs in which to raise cash, the Fortress team led by Eran Zur has filled the void, emerging as one of the few specialist debt providers for IP-backed or IP-rich companies. Among its other deals, in early 2015 it agreed a $50 million long-term financing facility with Marathon Patent Group.
Assuming that the agreement with Inventergy is approved then Fortress will effectively be in control of a brand new NPE. There is little detail as yet on the make-up of the SPE so it’s not clear if it will be managed by an existing Fortress employee or by an outside specialist. Zur declined to comment further on what has already been made public, but whoever takes charge should be able to benefit from striking deals in private, away from the spotlight of the public markets. They will also be able to tap into the experience of Zur, one of the savviest players in the monetisation space who co-founded RPX and then formed his own IP finance business with Joseph Kessler and Erez Levy, before all three joined Fortress in 2013.
Their track records suggest that Fortress may have a bit more luck with the patents than Inventergy and if market conditions improve markedly for patent monetisation then their timing in taking control of what should be some pretty decent assets might start to look particularly good. Plus, if Fortress is looking for senior licensing talent to help monetise their new found assets, as a story last month in the Patent Investor says they are, then there is certainly a lot of available talent out there.
For Inventergy the restructuring deal confirms what has seemed inevitable for some time as the company has struggled through the last couple of years. The restructuring deal does at least free the company from a chunk of debt that was starting to look like a millstone around its neck. Plus the move may now give CEO Joe Beyers and his team the opportunity to focus on Inventergy Innovations, a subsidiary designed to advise companies on commercialising their IP or technology. That kind of business, which is not simply focused on straight patent licensing, looks a lot more appealing in the current market.
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