Intangible assets – more valuable in larger hands
By Craig West, Founder, Succession Plus
As a business owner, you are always looking for ways to add value to your company. But what about the intangible assets that may be even
more valuable? These are the kind of assets that can’t be measured in monetary terms, but they can make a big difference in the overall
success of your business. intangible assets include things like your brand, your reputation, and your relationships with customers and
suppliers. In large businesses, these assets are worth even more because they have a wider reach and greater impact. So, if you’re looking
to add value to your company, don’t forget about the intangible assets that could be even more valuable with a strategic buyer.
What is an intangible asset?
An intangible asset is an identifiable non-physical asset without a physical form or substance. Intangible assets can be seen as invisible
to the naked eye, but they may still have a great value or potential worth to the business. Examples of intangible assets can include
intellectual property such as patents, trademarks, copyrights, trade secrets, brands and customer lists, and goodwill representing the value
created by positive customer relationships. Such intangible assets can also provide competitive advantages, potential revenue streams, or
cost savings in your business operations, making them an invaluable part of any organisation’s overall financial picture.
Examples of common intangible assets.
Intangible assets are non-physical assets that still add value to a business. They include things like patents, copyrights, trademarks,
trade secrets, brand recognition, and customer relationships. Patents protect inventions from competitors and give companies the exclusive
right to use that invention for a certain period of time. Copyrights exist in authorship or artistic creation, such as writing and art,
protecting writers and creators from their work being used without permission or payment. Trademarks are symbols or words that identify a
specific product to set it apart from similar products produced by other companies. Trade secrets refer to confidential information known
only to a few people involved with the company that, if disclosed, could negatively impact the business financially or competitively;
examples include formulas, recipes, processes, and strategies. Brand recognition is the perception of a company’s identity over time with
customers which establishes loyalty and trust. Finally, customer relationships are an intangible asset as they provide opportunities for
repeat purchases from loyal customers leading to repeat revenue streams for businesses.
How can you use them to attract a strategic buyer for your company?
Whenever looking to attract a strategic buyer, the first action to take is to understand your business, its operations, and its goals fully.
Do research into the companies in the industry that would match as potential strategic buyers and also identify any resources or expertise
they may be able to help you with if successful. Make sure all relevant data, such as financials and trends, are readily available, well
organised, indexed, and digitised for prospective buyers to access quickly. Have conversations with connections within the industry who may
be familiar with these potential buyers and their interests. Finally, actively create content— blog posts, webinars, etc.— that directs
potential strategic buyers’ attention towards what you can offer in terms of actual value for them for investing in your company.
How can you value Intangible assets properly?
Valuing intangible assets is an important but often complicated process. To ensure fair and accurate reporting of their worth, businesses
should use reliable judgment, established methodologies, and experienced personnel to develop thoughtful estimates and appropriate
assumptions upon which to base the value of these assets. The valuation should consider any industry-specific rules, such as those outlined
by GAAP or IFRS. Gathering documents throughout the review process that corroborate and support the estimation is also important to increase
reliability. Ultimately, it is imperative to look beyond financial statements when valuing intangible assets to understand their overall
value to a business or organisation.
What are the risks associated with selling a company with high intangible assets?
Selling a company with high intangible assets can carry with it certain risks. Intangible assets are often hard to appraise and as such, can
lead to confusion or misalignment when it comes to the sale price of the company. Additionally, buyers may worry that the company’s value
could be reduced due to changes in the marketplace or in broader economic trends. Cases of intellectual property infringement or employee
poaching can also reduce the appeal of a business when attempting to sell it because they indicate a lack of control or security on behalf
of the seller. Ultimately, understanding all of these different factors associated with selling a business with high intangible assets
allows scope for informed decisions and successful negotiations down the line.
Intangible assets are a key factor to consider when selling your business, as they can be a great value-add in the sale process.
While there are many risks involved when selling a business with high intangible assets, the rewards can be much greater for those that are
able to use these assets effectively. By understanding an intangible asset and becoming aware of common examples, you will be better
equipped to attract strategic buyers, properly value your company’s intangibles, and close the deal with a greater valuation for yourself.
To do this, it is best to have the assistance of advisors or professionals with expertise in this area so you can make an informed decision
when determining which buyer is right for you.