Clarivate's IP Unit: A Diamond in the Rough for Private Equity?

The world of intellectual property (IP) management is about to get a shake-up. Sources are telling us that Clarivate Plc (CLVT), the data and analytics giant, is drawing serious private equity interest in its highly strategic IP division—a move that could redefine the company’s future. This isn’t just a rumor; it’s a major strategic play with big implications for investors. Let’s dive in and unpack what this means.

Ask Aime: What impact will Clarivate Plc's strategic IP division sale have on the global IP management industry?

The IP Unit: A Hidden Gem?

Clarivate’s IP division isn’t just a side project—it’s the backbone of its business. Tools like IPFolio, CompuMark, and the Derwent World Patents Index (DWPI) help companies manage patents, trademarks, and contracts. These services are critical in a world where innovation is currency. But here’s the catch: the division’s revenue has stumbled. In 2024, recurring revenue (think patent renewals) dropped 5.4% in Q4 alone, dragging full-year revenue down 3.1%.

Yet, the unit’s potential is undeniable. It’s the kind of asset private equity firms drool over: a $358 million EBITDA engine (albeit shrinking) with recurring revenue streams and a fortress in the high-margin IP software space.

Why Private Equity Wants In

The buzz centers around Nordic Capital and CD&R, two heavy-hitters in the PE world. Nordic, which just bought Anaqua (an IP software firm) for $2.5 billion, sees synergies here. Pairing Anaqua with Clarivate’s IP tools could create a juggernaut in the space. But here’s the hitch: Clarivate is asking for a valuation "north of $4 billion", while bidders argue the unit is overvalued given its slipping EBITDA.

This valuation battle is key. If Clarivate holds firm, the deal could stall. But if PE firms blink, this could be a steal.

The Numbers: A Mixed Picture

Let’s get granular with the data:

- 2023 Revenue: $2.63 billion
- 2024 Revenue: $2.56 billion (down 2.7%)
- IP Unit EBITDA: Dropped 10.5% to $358 million in 2024

But here’s the silver lining: Clarivate is transitioning to subscription models, which could stabilize revenue. Their plan to discontinue low-margin transactional products by 2026 means the IP division could become leaner and meaner.

The Bidding War and What It Means for Investors

This isn’t just about the IP unit—it’s about Clarivate’s entire strategy. The company has already cut $200 million in debt in 2024 and launched a $500 million share repurchase program. These moves signal confidence, but the stock has plummeted 90% since 2021, leaving it deeply undervalued.

Insiders are buying. In March 2025, four insiders scooped up $1.54 million in shares at $4.24—a sign they believe in the company’s turnaround.

Risks and Red Flags

Nothing’s a sure bet. The IP unit’s struggles are real: patent renewals are drying up, and competitors like Thomson Reuters and Elsevier are nipping at Clarivate’s heels. Plus, the valuation standoff could kill the deal. If PE firms walk away, Clarivate might have to keep the unit—and its declining margins.

The Bottom Line: Buy the Dip?

Here’s my take: Clarivate is a buy at these levels, but it’s not for the faint of heart. The IP unit’s PE suitors are sniffing around for a reason—the division has $300–380 million in projected free cash flow for 2025, and its tools are irreplaceable in the IP ecosystem.

If Nordic or CD&R strike a deal, it could unlock massive value. Even if they don’t, Clarivate’s shift to subscriptions and debt reduction make it a contrarian play.

Final Call:
- Buy: If you can stomach volatility. The stock is a screaming valuation at current prices, and a deal would send it soaring.
- Hold: If you prefer stability—wait for clearer signs on the PE interest.
- Avoid: Only if you’re risk-averse. The risks are real, but the upside is too big to ignore.

In the end, this isn’t just about Clarivate—it’s about whether private equity can turn this $6.6 billion enterprise into a winner. The IP unit’s fate could be the catalyst. Stay tuned!