Aon plc (NYSE: AON), a leading global professional services firm providing a broad range of risk, retirement and health solutions, has announced the launch of its Intellectual Property (IP) Capital Market Solution along with the close of a significant IP-backed lending transaction worth over $100 million, believed to be the largest such transaction ever consummated.
“Aon is committed to helping clients navigate an increasingly complex world. The launch of this solution is a watershed moment, bringing together innovative lenders and insurance markets with Aon’s industry-leading, proprietary valuation technology to create a new alternative financing opportunity for IP-rich companies,” said Greg Case, Chief Executive Officer of Aon. “Intangible assets are the foundation of today’s global economy, and Aon is innovating first-generation solutions to help companies both protect and maximize the value of these important assets.”
The first deal involves Indigo Ag, a high-growth, IP-rich agriculture technology company, which is borrowing over $100 million from a lender utilizing its IP as collateral, with the value of that collateral insured by a group of insurance markets led by Markel Specialty. Hudson Structured Capital Management (HSCM) was the largest capacity provider.
Jim Gray, Executive Underwriting Officer of Professional Liability at Markel Specialty, said, “Markel is proud to have worked with Aon in crafting a unique solution, and look forward to building this new market with Aon in the future.”
Edouard von Herberstein, Partner at HSCM Bermuda, added, “We are excited to participate in the financing of IP assets through an innovative ILS friendly structure. This is yet another example of insurance and insurance-linked securities markets offering risk transfer solutions for intangible assets. We believe there are significant and growing opportunities and interest in that sector.”
Building upon Aon’s industry-defining IP valuation approach, Aon arranged for the lender an IP Collateral Insurance policy in excess of $100 million. The bespoke policy is believed to be the largest of its kind. By combining proprietary IP valuation tools and a collateral protection insurance policy, this collaboration enabled an IP-backed debt structure that helped Indigo raise additional funds while avoiding equity dilution.
“As an innovative company using microbial and digital technologies to facilitate positive transformation of the agriculture system, Indigo sought to find a way to collateralize its extensive IP asset portfolio,” said Jim Young, Indigo’s Chief Financial Officer. “In a first of its kind deal, Aon leveraged an approach that articulated the value of our IP – making it a true capital asset – which allowed us to secure a significant amount of non-dilutive debt financing.”
IP value is largely not understood in the capital markets. While IP may be the most valuable asset a company owns, current accounting standards typically do not allow internally developed IP to be explicitly valued as part of a company’s balance sheet. This accounting treatment, and historic lack of creditable valuation methodologies, results in most growth companies turning to dilutive equity to finance their growth.
“Aon is helping to provide innovative growth companies with a path to non-dilutive growth capital that preserves the ownership and value for their founders and early investors,” said Lewis Lee, CEO, Aon’s IP solutions. “We are excited to enable them to unlock this valuable asset and are now positioned to facilitate a wide range of transactions.”
Aon’s IP solutions, part of Aon’s New Ventures Group (NVG), is a global leader in assessing and valuing IP assets, leveraging a proprietary, industry-defining IP analytics platform. Aon’s Commercial Risk Solutions can help arrange insurance coverage with industry-leading insurers to help protect a lender’s interests in the IP that the borrower uses as collateral for the loan. The Indigo deal is a significant milestone for Aon’s IP Capital Market Solution, focused on leveraging IP assets to serve as collateral in an insurance-enabled debt structure for growth capital that avoids dilution.
The NVG, which comprises a team of senior leaders, was formed in the fourth quarter of 2018 to help realize the full potential of the Aon United growth strategy. The NVG focuses on the rapid incubation and delivery of new high-impact sources of value for clients.
Learn more about how Aon is continuing to innovate at scale to meet client needs by reading the recently published, “Helping Clients Navigate an Increasingly Complex World.”