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Acacia Research Looks to More Tech-Related Buys

Acacia Research Corp., the Irvine-based patent licensing and intellectual property firm that has both served for and been an investor in key local technology companies, says it’s looking forward to a busy year of acquisitions in 2021.

“We intend to acquire operating companies, divisions or other assets where we believe we can realize significant value following an operational or strategic restructuring,” Chief Executive Clifford Press said earlier this month while presenting third-quarter earnings.

He said the primary focus is on companies operating in “mature technologies, healthcare, industrial and certain financial services sectors.”

The company (Nasdaq: ACTG) posted $29.2 million in net income attributable to common shareholders in the third quarter after a $7.6 million loss in the same period year ago. Gross revenue in the quarter was $19.5 million compared with $1.7 million in revenue the year before.

Acacia calls itself an intermediary in the patent marketplace, “partnering with patent owners to unlock the financial value in their patented inventions.”

“We assume all responsibility for operational expenses and share net licensing revenue with our patent partners on a pre-arranged and negotiated basis. We also provide capital to the patent owner as an advance against future licensing revenue,” the company says on its website. The company says it delivers “monetary rewards to the patent owner.”

The company has changed the focus of its work over the past year.

Acacia’s prior core business of monetizing patents primarily through litigation has shifted to what Press last year called a “focused platform for investing in intellectual property, technology and other unique investment and acquisition opportunities.”

Press was named a director in 2018 following a proxy fight; he was appointed CEO in September 2019.

The company has been an active investor in upstart tech companies over the years; it was an early backer in Costa Mesa’s AI-focused firm Veritone Inc. (Nasdaq: VERI), which ranks No. 1 among OC’s fastest-growing small public companies with revenues of $50.4 million for the 12 months ended June 30 and 2-year sales growth of almost 220% (see list, page 29).

Shares in Acacia Research were trading at $3.60 apiece as of Nov. 19, for a gain of about 32% since the start of the year. It was recently valued at about $180 million.

Starboard Value

Earlier this year Acacia embarked on a strategic partnership with New York-based hedge fund Starboard Value, to build a platform to pursue opportunities that leverage Acacia’s governance experience and Starboard’s capital resources.

In its first transaction with Starboard, Acacia in June acquired 18 public and private life sciences companies from the former Woodford Equity Income Fund for a total of $282 million. It has sold off its positions in eight companies and recovered $187 million out of the $282 million, the company told financial analysts on Nov. 9.

“Since announcing our acquisition of the Woodford portfolio in June, we have completed dispositions that have recovered two-thirds of our purchase price. We continue to hold substantial value in the securities of public and private companies remaining in the portfolio,” according to Press.

The CEO added: “We have a number of very good projects in the queue and we expect to be quite busy in the coming year.”

Press said the company, founded in 1993, has a strong balance sheet “from which we can make additional investments.”

Al Tobia, Acacia’s chief investment officer, said during the earnings presentation: “We believe that structural inefficiencies in the small-cap value sector create opportunities for us.”

A year ago, Acacia said it would get up to $400 million under the agreement with Starboard Value to be used for strategic investments and acquisitions.

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Kevin Costelloe
Kevin Costelloe
Tech reporter at Orange County Business Journal

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