Imagine two companies – Company A and Company B. They are in the same industry and based in the same city, with similar financials and growth projections. So, when the owners decide the time is right to exit, you would imagine that both businesses would attract a similar price?
In fact, business buyers are paying a premium price for Company A, while Company B is struggling to find a buyer. How can this be? Aren’t the buyers using similar business valuation models in order to determine the value of potential targets? The answer to this significant divergence in price can be explained by two words: intangible assets.
Here is the official definition of intangible assets according to Investopedia:
The important thing that business owners need to know about intangible assets is this: they can play a significant factor in a buyer paying a premium for a company, but do not appear on a balance sheet. This means that two companies can have drastically different values to potential buyers even if every tangible aspect of their business is identical.
These intangible assets are the factors that give your company its unique selling points, and impact your business worth in a way that it wouldn’t for another company. Their relative value will depend on the buyer, although there are steps being made by some of the world’s largest firms to implement systems to accurately measure these values. The Coalition for Inclusive Capitalism, which includes the chief executives of Unilever, PepsiCo and Nestlé, aims to create a unified measurement of a company’s long-term value, and is something our professionals at Generational Equity will be keeping a close eye on.
For the time being, as the “worth” of these intangible assets vary based on a buyer’s business valuation model, it is vital that company owners do a complete analysis of these assets as part of your comprehensive business exit strategy.
Quite often, identifying the intangible assets in your business can be difficult to accomplish. This can be due to a variety of reasons. Perhaps you as the owner are so embedded in the operations of your business, you take these intangibles for granted rather than appreciate their true worth? Or, you simply may not have time to conduct a detailed analysis of these “off balance sheet” assets and what impact they are having on your overall business value.
To give you a helpful starting point, we have put together a sample checklist that you can use as a template for your company’s intangible asset review process. This particular example focuses on the intangible assets of a manufacturing enterprise, although many can apply to a company in any industry. We recommend you use this as a guideline, but also seek professional guidance to ensure you cover all intangibles for your business.
This list is by no means exhaustive, but should help give you an indication of the intangible assets in your company that, while don’t have a fixed value, could make the difference in buyers pursuing your business over another. This is extremely important, which is why we recommend you sit down with your trusted advisors to help you brainstorm over what sets your organization apart.
Why is this such a crucial step? Because finding the optimal buyer for your business will depend greatly on your intangible assets. Each buyer will evaluate a company differently based on these details, so it is important to document, analyze and understand your intangible assets to locate the ideal buyer and secure the best return on investment for your business. The more you know about the true value of your business, the better your chances of completing a successful exit.
Our experienced M&A advisors at Generational Equity are here to help you find the value in your intangible assets. They will ask the key questions to establish your business’ true worth, and find an ideal buyer through our extensive middle market portfolio, DealForce. If you’d like to learn more, attending one of our complimentary executive conferences will offer greater insight into business valuation models and creating the ideal exit strategy. These are held regularly across North America, so please check to see when we will next be in your area.
You can also reach us on our dedicated contact page. We look forward to hearing from you soon.
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice.
Generational Wealth Advisors’ affiliates are all part of one corporate family, they work with one another and may work together to provide services to you. The sharing of your information among affiliates enables Generational Wealth Advisors to serve you more efficiently and makes it more convenient for you to do business with Generational Group. Generational Wealth Advisors is permitted by law to share information with its affiliates. All of our affiliates follow similar privacy policies.
For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Group may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, Trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Group BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Group.