The Intangible Revolution: Why Intellectual Property is the New Currency of Merger and Acquisition

Introduction

In the modern economy, is the company that masters intellectual property truly prepared to unlock the hidden value driving corporate transformation, or will they be blindsided by the invisible risks inherent in intangible assets? The corporate world has undergone a seismic transformation. Where yesterday’s acquisitions targeted physical factories and machinery, today’s most ambitious mergers focus on Intellectual Property (IP) as the primary source of value creation. This shift is not merely conceptual; it is measurable. In 1975, intangible assets accounted for only 17%¹ of the S&P 500’s market value. By 2026, that figure has climbed to a staggering 90%², signaling a decisive reorientation of economic power from tangible industrial assets to knowledge-based resources.

The rationale behind IP-focused M&A is often rooted in Market Exclusivity and Speed to Market. Under Section 48 of the Patents Act, 1970, a patent provides a twenty-year monopoly, allowing an acquirer to command premium pricing³. This was vividly demonstrated in the global acquisition of WhatsApp by Meta. The primary driver was not WhatsApp’s immediate revenue, but its proprietary data processing algorithms and the “Network Effect” of its user base intangible assets that provided Meta with an unassailable lead in communication technology. Similarly, in Dharamshila Belting Pvt. Ltd. v. Deepak Bansal (2020)⁴, the court highlighted the “Triple Identity” of trademarks, reinforcing that identical marks in identical trade channels lead to a “mathematical certainty” of confusion.For an M&A acquirer, this case underscores that the value of a brand lies in its exclusivity; if a target’s IP is diluted by copycats, the “currency” of the deal loses its value.

The Coca-Cola Paradigm and Trade Secret Strategy

Coca-Cola serves as the ultimate case study in this “Invisible Economy.” While its bottling plants are valuable, its Trademarks and Trade Secrets are its lifeblood. By protecting its formula as a trade secret rather than a patent, the company bypassed the time-limited nature of patent law⁵. This sophisticated interplay between Section 2(1)(zb) of the Trade Marks Act, 1999⁶ and the strategic use of trade secrets demonstrates how IP transcends traditional financial metrics.

In the case of Tesla Inc. v. Tesla Power India Pvt. Ltd. (2023)⁷, the court’s focus on “Dishonest Adoption” revealed that IP value is also tied to the integrity of its origin. When an acquirer looks at a target, they must ensure the target didn’t “ride the coattails” of another brand. If the adoption was dishonest, the IP is a liability, not an asset.

The Due Diligence Roadmap and Legal “Teeth”

The shift toward IP-heavy deals has altered the “Duty to Investigate.” In the landmark case of Austin Nichols & Co. v. Arvind Behl⁸, the Delhi High Court established that acquiring companies bear an affirmative obligation to conduct rigorous due diligence. They must investigate trademark validity and ownership clarity before a transaction concludes.

This is further supported by Britannia Industries Ltd. v. Copycat Seller (2022)⁹, where the court prioritized protecting consumer trust over procedural delays. For M&A professionals, this means that the “Chain of Title” , the documented history of who created and who owns the IP, is the most critical document in the data room. Under Order XXXIX of the Civil Procedure Code¹⁰, A lack of diligence can result in an immediate injunction against the acquirer if the target’s IP is found to be infringing.

The “Inventory Check” is where legal and financial strategies converge. Registered IP, protected under the Copyright Act, 1957 or the Trade Marks Act, 1999, provides clear evidence of ownership. However, unregistered assets like Goodwill require complex valuation. In Tapovan Foods v. Ganraj Enterprises (2021)¹¹, the court’s swift action against identical branding in the food sector showed that “Goodwill” is not just a line item, it is an enforceable right that prevents market erosion.

Effective M&A in 2026 requires a deep understanding of Section 29 of the Trade Marks Act¹², which defines infringement. If an acquirer fails to identify that a target’s “well-known mark” status is legally vulnerable, the projected ROI can evaporate.

Conclusion

Intellectual property has fundamentally redefined the “win” in mergers and acquisitions. We are no longer in an era where the biggest factory wins; we are in an era where the most sophisticated IP portfolio dominates. The empirical reality that 90% of modern corporate value is intangible demands a new breed of corporate strategy. By aligning rigorous due diligence with the statutory protections offered by Indian IP law, companies do more than just buy a brand; they secure a sustainable competitive advantage. Ultimately, the successful corporations of the future will be those that treat IP not as a legal footnote, but as the core currency of their growth.

Citations

1.  https://anderson-review.ucla.edu/boom-of-intangible-assets-felt-across-industries-and-economy/ ↩︎
2.  Id ↩︎
3. The Patent Act, 1970, Section 48 ↩︎
4. Dharamshila Belting Pvt. Ltd. v. Deepak Bansal (2020 CS(COMM) 1388/2025 & I.A. 32284/2025 ↩︎
5. Gerben IP Blog, https://www.gerbenlaw.com/blog/coca-cola-trademarks/December 17,2025 ↩︎
6. The Trademark Act,1999,Section 2 (1) (zb) ↩︎
7. Tesla Inc. v. Tesla Power India Pvt. Ltd., 2024 SCC OnLine Del 4592 ↩︎
8. Austin Nichols & Co. and Seagram India v. Arvind Behl, 2005 SCC OnLine Del 1276 ↩︎
9. Britannia Industries Ltd. v. Copycat Seller (2022) CS(COMM) 1393/2025 & I.As. 32346–50/2025 ↩︎
10. The Code of Civil Procedure,1908, Order XXXIX ↩︎
11. Tapovan Foods v. Ganraj Enterprises (2021) 2021 SCC OnLine Bom 2603 ↩︎
12. The Trademark Act,1999,Section 29 ↩︎

Expositor(s): Adv. Archana Shukla, Ishita Garg (Intern)