A strategic buyer is willing to pay a premium multiple but wants us to transition our proprietary IP to their foreign subsidiary immediately after signing the letter of intent. How do we protect our intellectual property from being transferred or utilized before the transaction fully closes and the funds are wired?

Question

Tyler Smith · Accepted Answer

Never transfer intellectual property or operational control before the wire clears and the deal is officially closed. Strategic buyers often use the diligence window under a letter of intent to extract valuable operational know-how or customer relationships, only to walk away or renegotiate the price once they have what they want.

To protect your proprietary IP, you must establish strict confidentiality and staging protocols. Your letter of intent and non-disclosure agreements must explicitly state that no intellectual property, source code, or proprietary algorithms will be transferred or integrated until the transaction is closed. Diligence requests regarding IP should be handled through a secure virtual data room with view-only permissions, and highly sensitive code should only be reviewed by a clean-team, which is an independent third-party consultant who reports on the code's validity without showing it to the buyer's internal engineers.

Make protecting this asset a quarterly Rock for your leadership team during the transition. Use your weekly Level 10 Meeting™ to review the information requests coming from the buyer. Ensure your technology seat is clear on what can be shared and what must remain locked until closing. By maintaining strict operational boundaries, you protect your most valuable asset and preserve your negotiation leverage until the deal is done.