The acquisition of intangible assets, such as intellectual property and trademarks, is advantageous at this moment due to emerging technologies like generative AI and a large pool of available assets. Here, senior vice president and chief commercial officer of Hilco Streambank Richelle Kalnit provides insights into the intangible asset market from an M&A standpoint.
What does the term “intangible assets” encompas
Richelle Kalnit: Intellectual property that is registered with a government, such as patents, trademarks, and copyrights, is considered an intangible asset. The owner of such property is entitled to certain protections as well as the ability to prevent others from using it in a specific area or category. However, it goes beyond just that.
Software, domain names, consumer information, and marketplace accounts that companies have developed with retailers like Amazon, Walmart, and Target are more examples of intangible assets. Custom instances of external platforms such as Shopify are also included. Additionally, it will have more and more in-house artificial intelligence capabilities, like generative AI tools that produce results based on a private company’s data set.
How should a business leader go about evaluating their company’s intangible assets?
R.K: It’s important for a leader to pose the correct questions to their team. Ask follow-up questions after you’ve identified possible intangible assets within your organisation. For instance, find out how Shopify is used and if any modifications have been done if your firm uses it. In order to determine where investments have been made and to tailor follow-up questions appropriately, it is also helpful to review the balance sheet. Companies must recognise these assets because, if managed well, asset-based lenders will frequently assign value to them in a borrowing base, providing a company with additional liquidity.
What is the current market for intangible assets like? Is it a buyer’s or a seller’s market?
R.K: Things are favourable for buyers right now. Interestingly, aside from IT businesses, most M&A transactions do not now contain a significant amount of generative AI tools. Nonetheless, purchasers will have the chance to purchase exclusive generative AI technologies in the upcoming years. Since not all prospective buyers will have created their own tools, the study that buyers will initially receive will be a buy versus build analysis. Potential buyers will likely have created their own generative AI tools over time, so when they examine M&A deals containing intangible assets, they should be looking to add to their existing resources.
On what basis are valuations of intangible assets determined?
R.K: Important criteria such as sales, gross margin, customer engagement, and the channels used to reach the client are usually the basis for intangible asset valuations. Direct-to-consumer brands, e-commerce, wholesale presence, retail, licencing, and third-party marketplaces may all be involved in this.
What should a buyer’s strategy look like in this market?
R.K: If you have your eye on a specific brand, you should inform your broker, agent, or banker exactly what you want, so they can collaborate with the corporation to secure the asset and provide it to you. Make sure to express any particular aspects that you find appealing.
How can a seller protect their business when selling their intangible assets?
R.K: Preserving assets is crucial. Even though we’re discussing intangible assets, these assets usually have a tangible component, such as data, software, and social media account logins. It is imperative to consider that deliverable from the very beginning of the process.
How does the increasing protection of customer data affect its value as an intangible asset?
R.K: The sale of customer data needs to be handled by experts who understand how to read privacy policies and understand the nuances of the sale in various contexts. The sale of personally identifiable information must be handled with care to ensure that the integrity of the data is maintained.
How does generative AI factor into the valuation of intangible assets?
R.K: Generative AI is still in its early stages, but its potential is vast. While the specifics of its impact on the valuation of intangible assets are not yet fully known, it’s likely to play a significant role in the future. I anticipate that generative AI tools will both be valuable assets in and of themselves, and will also contribute to the overall profitability of the company.
