Most business owners accept how important their intangible assets are to their company’s success – their brand, their customers’ loyalty, internal processes, systems and know-how are all crucial elements that contribute to value, even if they aren’t usually included as specific figures on the balance sheet of the financial statements.
However, because these assets aren’t usually documented, there is a danger that they may become forgotten, which can impact on a business’ strategic development.
Recognising and documenting the individual aspects of a company’s intangible assets can allow businesses to maximise their value and demonstrate the company’s full valuation to third parties, when necessary.
How are intangible assets valued?
These assets can be valued using one of three acceptable methods: based on the cost of creating or re-creating them, the income directly generated by them or by way of comparison to similar transactions which have already taken place in the market.
The market valuation method, in particular, requires significant experience and databases of precedent transactions, which we have access to via our relationship with Metis Partners, an award-winning UK and US-based boutique consultancy which has specialised in the valuation and marketing of IP assets for 20 years. They are able to work with our clients to identify and document the full range of intangible assets, advise on how to protect them and, if necessary, assist in the marketing to sell them.
When is a valuation report useful?
Just as a business would instruct an independent valuer periodically to value property and potentially other tangible assets, written valuations of intangible assets can be incredibly useful documents.
• If a business is negotiating with a potential Joint Venture partner, the respective values of the company can be a factor when assessing the terms of the deal;
• When raising capital, an investor or a lender will want comfort that the value of the company provides sufficient security and ensuring non-Balance Sheet assets are included in any valuation can reduce the overall perceived risk;
• If an entrepreneur is undertaking exit planning with the view of ultimately selling their company, they can focus on increasing the value of all the company’s assets so that when the business goes to market, purchasers’ investigations provide conviction that allows them to offer the highest possible value achievable in the market
If you would like more information about how to recognise, increase the value or potentially sell your intangible assets, don’t hesitate to get in touch and we can discuss your requirements in more detail.