Authored by Michael D. Moberly, Principal, Founder kpstrat
I am hard-pressed to recall any negotiation (business transaction) in which intangible assets, i.e., variations of (proprietary, competitive advantage, branded) intellectual, structural, and/or relationship capital (holding standalone value) are not merely in play, but specifically relevant to whatever the aspired outcome may be.
- Routinely, a desired outcome (to a negotiation) is to converge newly acquired assets with other existing (intangible) assets to add value, competitiveness, expand market share – brand, create efficiencies, and/or build scale, etc.
Far too many transaction negotiation tactics – strategies (which I am familiar) appear variously framed – focused on (translating – transferring) the content of (conventional) balance sheets and financial statements (and similar projectives), and less so on…
recognizing – factoring how either (in terms of outcome) is reliant on the contributory roles, value, revenues, and competitive advantages produced/delivered by business things intangible.
Transaction management and negotiation teams whose radar is not acclimatized to – familiarized with specific intangible assets being sought and in play, are less likely to negotiate a sustainable (lucrative, competitive) outcome.
- Similarly, unfamiliarity with and/or dismissiveness toward the foundational intangible assets in play, will likely lead, unnecessarily, to negotiation impasses and/or ‘walk-aways’ by the holders (potential sellers) of those assets.
Too, in instances in which the holder of the ‘sought after intangible assets’ recognizes – appreciates their contributory roles and value, but, the prospective buyer doesn’t; which party stands to benefit.
Respectfully then, it’s likely the party holding – executing the most relevant ‘operational familiarity’ with the intangible assets in play, i.e., their value, competitive advantages, proprietary status, contributory roles, etc., will likely…
be better positioned (tactically) to convert that knowledge (for ‘business things intangible’) to achieve the most favorable (lucrative, competitive, sustainable, and resilient) outcome.
My experiences in these matters pointedly indicate…
a business’s intangible assets (it has developed, nurtured, and applied) are seldom (if ever) distinguished or itemized in conventional or business valuations (or, financial statements – balance sheets, for that matter) unless (a buyer – seller) specifically requested.
Yes, I do recognize (business) valuators – accountants’ penchant for adherence to conventions, standards, and rules set forth by relevant state-federal regulatory-oversight bodies, academic disciplines, and professional association certifications.
However, wholly omitting, dismissing, under or non-reporting of the contributory roles and values of intangible assets in any negotiated business transaction gives little or no recognition to…
the irreversible economic fact – business operation reality that today, and for the foreseeable future, 80+% of most business’s value, competitiveness, and revenue generation capacity either lies in or directly emerges from various forms and categories of intangible asset.
Consequently, increasingly large percentages of businesses (globally, across sectors) are now, irreversibly, intangible asset intensive and dependent.
Achieving operational familiarity with – for ‘business things intangible’ is a good thing!