AOL Said to Hire Evercore to Find Buyer for 800-Patent Portfolio
AOL Inc. (AOL) hired Evercore Partners Inc. (EVR) to find a buyer for its more than 800 patents and explore other strategic options, three people with knowledge of the matter said. — Private-equity firms …
Context & Ripple Effects
This sale process is the latest step in a strategic review that has run for well over a year: AOL reportedly hired advisers back in late 2010 to weigh options including a Yahoo combination, and in August 2011 it was reported to have huddled with a top M&A team while CEO Tim Armstrong publicly denied any deal in the works. Since then the company has kept assembling the machinery for big transactions — Wachtell Lipton and Allen & Company were confirmed on retainer — while absorbing a continuing wave of executive departures.
The patent angle matters because AOL's operating story has been under strain: BI Research argued in December 2011 that something is fundamentally wrong with the media business, and Huffington Post employees who saw vested options convert at roughly $20 a share watched AOL stock fall to $12.22 by August 2011. Shopping an 800-patent portfolio through Evercore converts a dormant balance-sheet item into potential cash at exactly the moment the core business offers little to celebrate. The story traveled widely the same day, with ZDNet, TechnoBuffalo, Business Insider and parislemon all picking up the Bloomberg report.
First-order effects
- AOL gains a live auction for more than 800 patents with Evercore running the process, and the Bloomberg report notes private-equity firms are among the interested parties — immediate pressure on any bidder to price the portfolio before word spreads further.
- Evercore joins Wachtell Lipton and Allen & Company in AOL's advisory bench, meaning three separate mandates are now working the company's strategic options simultaneously.
Second-order effects
- Any cash realized would give Armstrong ammunition against the stock-pressure problem documented since the Huffington Post options conversion — buybacks, debt paydown, or funding for content acquisitions become plausible uses, and investors will push to see which.
- Other legacy web companies sitting on large unexploited patent troves face fresh questions from their own investors about whether they, too, should monetize IP rather than let it idle.
Third-order effects
- The pattern points toward patent portfolios being treated as standalone financial assets shopped by banks rather than defensive arsenals held for litigation — a structural change in how aging internet companies extract value from pre-social-era IP.
- If mid-size portfolios like AOL's clear at meaningful prices, expect intermediaries and buyers to build standing processes around such auctions, formalizing a market that until now has been episodic.
The trend: Legacy consumer-internet companies are increasingly turning dormant patent portfolios into liquid assets through banker-run sales, converting inherited IP into shareholder returns instead of holding it defensively.