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We own what?

Some time ago a friend of ours was at a flea market with a friend of his. Our friend’s friend stopped at a booth, picked up a pot, and asked the vendor how much it cost. The price was $50, and he bought it. He carried it to the next aisle, where he sold it to an antique dealer for $1,500, since both he and the antique dealer recognized it to be a 17th century item in reasonably good condition. Obviously, anyone who has seen Antiques Road Show knows that many household possessions can have unexpected value.

The same kind of thing happens with corporations, too, particularly with large corporations, and especially with large corporations that acquire other corporations. We expect this when dealing with intellectual property, because there is rarely any sort of accurate inventory of IP. Because of this, IP is often simply lost. But we are frequently surprised afresh to discover that companies often have little idea of the physical property under their control. While it seems hard to believe that a corporation can be unaware of something really big that it owns, we can assure you that inventories of acquisitions don’t always make it up the food chain.

In one case, we helped work through a divestiture, and found a number of anomalies to be reconciled. Mostly these were accounting issues, small things that merely had to be associated with one cost center or another, but nothing that one would be surprised to encounter. Then we found something quite out of the ordinary. We walked into the CEO’s office and asked what their plans were for their ship.

“Ship? The company doesn’t own a ship! Why would we own a ship? How could we own a ship?” As it turned out, they had acquired a ship that transported potable water from one island in the Caribbean to another as part of an acquisition. Although the vessel operated at a profit, it was in a profit center hidden in a profit center hidden in an acquisition made some time ago. Nobody on the management team, or even on their staff, had any idea that the corporation owned a ship.

If a company can overlook a ship, you can imagine how easily it overlooks smaller physical property. Keeping accessible and current inventories is as critical for tangible assets as it is for intellectual assets.

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