Background
An American light sport aircraft company, preparing to enter into a license agreement and joint venture with a Chinese manufacturing partner, retained Ocean Tomo to help structure the financial terms of the deal. As a startup seeking both a cash infusion and long-term success, the company aimed to balance upfront fees with running royalties to align incentives and mitigate risk.
Engagement
Ocean Tomo licensing and valuation experts were retained to support the American light sport aircraft company in structuring the financial terms of its licensing agreement with a Chinese manufacturing partner. With both parties needing to agree on financial forecasts as a foundation for calculating upfront fees, Ocean Tomo assisted with development and validation of the forecasts. Once the forecasts were established, we assisted the clients in modeling various combinations of upfront fees and running royalties, enabling informed decision-making and productive negotiation.
Results
The approach identified the optimal mix of running royalties vs. lump sum payments and led to a mutually acceptable agreement on the financial terms of the licensing deal and joint venture, allowing the American client to enter and grow in the Chinese market.
