The story of Air America or, sometimes it is about what you know

It can be devilishly hard to value what a key person in a business knows, who they know, why they know what they know, or why they know who they know.

If you’re feeling dizzy, spare a thought for our poor analysts!

The entire point of intangible assets is they often aren’t recorded precisely because no one in the company quite understands their value. They can sense the value, but it takes time and perspective to unwind the Gordian Knot and see the value explained out in full HD.

This is especially true for relationships and industry expertise. It’s all very well that key relationships are codified on paper, but exactly how does one explain the value of unique relationships to investors or to an interested buyer?

Worse, what if the relationship is super valuable, but it can’t be spoken about unless everyone in the room is covered by titanium-strong non-disclosure agreements (NDAs)? How exactly should its value be recorded in an investment memorandum, for example? “Trust us, bro” doesn’t create much confidence.

The truth is, while a person can’t be an intangible asset, a person’s relationship, can be hugely valuable for a company – and also very risky. A great example of such value comes from the world of intelligence.

When it was set up in 1946, passenger and cargo airline Air America appeared to be just like all the other international airlines. Chartered in Delaware and listed in Dun and Bradstreet, the company had thousands of employees and about a hundred aircraft flying across the world.

But Air America’s main office was only a few hundred yards from the White House for a good reason. That’s because it was a front for CIA.

The intelligence agency had created Air America because it needed a way to move weapons, materials and people that went beyond its Congress-approved budget and wouldn’t be noticed. Air America was just a small part of CIA’s huge network of fake – but operational – companies.

Yet Air America had a dilemma if it were to keep up appearances. To sound legitimate, Air America needed to build a strong reputation by actively competing fairly for commercial contracts. However, CIA was always putting its thumb on the tendering scales. After several rounds of competitive bidding for a set of military contracts, a few other airlines began to notice that Air America always seemed to win certain deals.

One observant airline CEO decided to investigate. He flew to Washington, met with relevant officials and was told that everything was above board. The bidding process was legal, and Air America was simply offering the lowest bids. Nothing to see here. Move along.

But the CEO had also heard rumours about Air America’s background, especially in places like Hong Kong where its pilots were well-known. So, he hired a lawyer who also happened to be a former Secretary of the Air Force. Together, they went back to Washington and after a few short meetings with the right officials, a message went out across the government: “Keep this guy happy or he might spill the beans.”

As a result, the CEO walked away with the promise of a few juicy contracts in the Pacific, saving his airline from financial struggles. He had stumbled on a secret behind how the system worked and wasn’t shy about using that knowledge to his advantage.

Over time, Pentagon officials came and went. But the CEO would always set up a new meeting with the fresh faces and tell them the same story about a “suspicious” airline operating across the world. Each time, the cloak of official security surrounding Air America made it difficult for the new officials to get the full picture. So, they would consult with their staff, who would again suggest placating the CEO to avoid any legal scrutiny that could expose the secret.

The result? The CEO went on to secure contract after contract, for years. His strategy worked so well that he eventually built one of the largest and most successful companies in the airline industry. Milking the secrecy of Air America lasted until well into the 1970s when the CIA front company was finally shut down. By that time, the CEO’s company was flush with cash.

You might be surprised how often stories like this occur. Even if the inside knowledge isn’t as sexy, many businesses become successful after stumbling on a tidbit of information they probably shouldn’t have seen. This can be a hugely valuable intangible asset.

That’s all very well for the company since their bottom line can look fantastic. But what happens when that business is being courted for a sale or chasing outside investment for growth? How should it value the fact that it is essentially blackmailing the CIA?

When do you bring that up in the conversation with buyers?

EverEdge has many times seen intangible assets that require a great deal of sensitivity. We also know that some companies can attribute their impressive success to one or maybe a few intangible assets that hold an unusual amount of weight. Valuation companies have time-tested ways of measuring these intangible assets for you. But sometimes it’s not easy.

Always remember, what you know is worth something. And if what you know can make you millions of dollars without the risk of having an “accident,” go for it. Let us do the heavy lifting of valuing those intangible assets once you’ve put them to work.