We recently assisted a client who found a private label brand that they wanted to buy. This business had about 200 SKUs in the toy category. We reviewed their financials and everything looked great, just as the seller claimed. Their mailing list held 500,000 contacts, the website was beautifully designed and social media following was strong. The seller spent a fortune on creating custom packaging for all their SKUs and was selling the business for a 25-multiple, which is fairly low compared to similar brands. Our client told us it seemed like a great buy, but here’s why the deal didn’t pull through.
As trademark lawyers, one of the first things we did for our client was conduct an intellectual property assessment. During our investigation, we discovered that the brand being sold did not have a USPTO trademark. To make matters worse, we realized that their brand name was too similar to other existing trademarks; therefore, they would not be able to obtain a USPTO trademark. In other words, all the money, energy, and time the owner had invested into the brand were put to waste because now they would be forced to rebrand (re-design the packaging, websites, marketing materials, brochures on over 200 SKUs).
The re-branding was such a tremendous cost that two other buyers had already backed out of the deal for this reason.
Sadly, we see cases like this far more often than you would think. This is why we constantly remind our clients that it’s not enough to build a private label brand that’s highly profitable. In order to command top dollar for your private label brand, you need to legally own your trademark. Companies do not want to purchase something that may be subject to a trademark infringement lawsuit. So don’t underestimate your trademark’s value, it’s worth far more than you think!
If you need help registering your trademark, get in touch today. Our team can help ensure your trademark application runs smoothly!