When you approach buyers with the opportunity to acquire your business, you need to be clear about what your company’s value proposition is to a specific buyer. What features does your business have that would add value beyond the pure number-driven ecoomic value of your company? But before you can determine what these features are, we need to define “intangible assets.”
Intangible assets, according to the Generational Equity M&A Glossary, are:
Intangible (Hidden) Assets – The assets of a business that have value but are nonphysical and not shown on the balance sheet, such as patents, software, heavily depreciated fixed assets, strong contractual relationships and an experienced workforce. Also referred to as Off Balance Sheet items.
Here is a list of intangibles that might apply to your business:
This is just a partial list I created a long time ago to help deal makers think about what could be intangible yet very attractive to specific types of buyers.
Here is the key: You need to determine what features of your business various types of buyers will find attractive and then market these features.
If you are working with an M&A advisory firm like Generational Equity, they will do this for you as part of their post-evaluation, pre-marketing due diligence. Please note that our deal makers are skilled in making sure your company’s intangibles are clear to buyers. Also note that the value of your business may be much higher to specific buyers because of your intangibles. Again, a skilled deal maker will know which buyers to approach regarding your off-balance sheet assets that would be attractive.
A perfect example of a business owner receiving more because of his intangible assets is a deal (or actually two deals) that we closed last year. We were aggressively marketing our client, Johnston Enterprises, and were disappointed that the offers we were getting were nowhere near what the client wanted.
We then broke the company into two parts: Johnston Ports and Johnston Grains and ended up getting a substantially higher total dollar amount. Why? Because the buyers of the two entities ultimately saw value in the intangibles of each but did not want both for strategic reasons.
The point is our deal makers working for Johnston had the experience and skill set needed to recognize how the intangibles of the individual entities were actually greater than the sum of the larger company.
You need to step back and look at your company as well before you approach the market. What features will buyers find attractive that your business has off the balance sheet? Take some time to ponder this question because it will pay off in the long run.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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