Business Valuation Services
Intangible asset Business valuations
As Australia continues to build economic prosperity in today's knowledge-based economy, intangible assets have become increasingly important to enterprise growth and success. Today, that intangible assets are really the only lever that can move enterprise value beyond cash flow multiples and it is critical that Australian businesses recognize the value of these assets and how to lever them.
Intangible assets (items such as data, content, software code, company and product brands, confidential information, inventions, patents, industrial know-how and design rights) account for more than 87% of all company value today. They are now the primary driver of company profitability and growth.
Unfortunately, intangible assets are essentially ignored by modern accounting standards. They either never make the balance sheet, are lost under the amorphous term “goodwill,” or are listed at cost (and there is essentially no correlation between cost and value with intangible assets).
Why should I value my intangible assets?
Conventional business valuation methods tend to significantly under-value intangible assets and intangible asset-rich companies.
For example, a recent report from the UK Treasury highlighted that although the world’s five most valuable companies are together estimated to be worth US$4.6 trillion, their balance sheets report just US$225 billion of tangible assets. The other US$4.3 trillion of value is missing in action.
This is also evident in Australia where a similar scenario occurs when looking at the financial statements of a number of the largest Australian organizations.
This is a major problem for shareholders managers and directors because it means that:
Many intangible asset-rich businesses are significantly undervalued relative to their true value.
Many companies own valuable intangible assets are unaware of them and are unable to leverage them because their financial accounts do not refer to them
How does an intangible asset business valuation work?
Because intangible assets have been largely ignored by accounting standards, intangible asset valuation is an area that remains poorly understood. Many accountants and valuation providers erroneously claim “you cannot value data/ brands/content/patents etc”. This is incorrect.
While more complex than a conventional valuation, there are methods of valuing intangible assets that are reliable, accurate and robust.
Modern intangible asset valuation methodologies work from the general principle that a strong intangible asset position delivers enhanced competitive advantage which in turn translates into superior market share or margins and ultimately significantly increases the value of the business.
EverEdge BenchMark™ Intangible Asset Business Valuation
Using a proprietary three-factor model, EverEdge’s BenchMark™ Intangible Asset Business Valuation methodology utilizes both traditional quantitative methods but importantly also analyzes the Contextual and Qualitative factors. This is critical as these factors are primary drivers of intangible asset value.
This enables both companies and investors to:
Make significantly more informed decisions regarding exits, capital raises, and M&A, JV or license transactions
Better articulate value to potential investors or acquirers to drive increased pre-money or exit values or to potential JV or alliance partners
More robustly defend license or tax transactions or litigation positions
Make better decisions regarding which R&D projects are likely to generate the best “bang for buck"
EverEdge BenchMark™ Intangible Asset Business Valuations provide companies and investors with robust, defensible business valuations that articulate the true value of your company or critical intangible assets.
This is more than theory. EverEdge’s BenchMark™ Business Valuations have been instrumental in assisting our clients to raise more than a billion dollars in capital.
We have helped to generate the following outcomes for our clients:
Provided the business valuation that supported the largest capital raise ever in Asia for a pre-revenue company: $400M raised at a $200M pre-money valuation [Singapore]
Oversaw the sale of a SAAS company at a 67X multiple [Australia]
Oversaw the sale of a financial services company at a 32X multiple [United Kingdom]
Sold the intangible assets of a failed company on behalf of its investors, generating a 45X return [United States]
Valued the intangible assets of a publicly-traded company entering a JV saving them US$22M in cash [New Zealand]
These results mean our Return on Fees tend to be very strong - typically more than 10X - as even a small upward movement in pre-money valuation vastly offsets our fees. For example, consider a small equity raise: if a traditional valuation suggests a pre-money value of $10M and EverEdge’s BenchMark™ business valuation supports even a small (20%) value lift, this generates an additional $2M in increased value. Even if we assume valuation fees of $100K this is a 20 to 1 return on fees. Many business valuations will cost considerably less than this.
Robust, accurate, business valuations
A broad range of factors are typically reviewed in an intangible asset valuation, which means the resulting report tends to be more expansive, with a greater emphasis on prose, explanation, and evidence than endless (easily manipulated) spreadsheets.
An EverEdge BenchMark™ Intangible Asset Business Valuation will read as a robust, defensible, business-focused report that articulates and contextualizes the value of the most valuable and important assets the company owns today - your intangible assets.
The valuation will be built on a solid interlocking framework of multiple, well-researched factors that together support a value that can be relied on. This enables companies to seek – and secure – better outcomes during transactions and to better understand day-to-day how their intangible assets can be managed to drive additional growth and profitability.
EverEdge's team is also available to meet with investors, counter-parties to M&A or JVs, regulators or tax authorities or appear as expert witnesses to defend their valuations.