Our monthly newsletter endeavours to give you insights in to changes and trends we are seeing in the market or industry.
Newsletter - April 2025
Intangible Assets
The chart below shows the intangible asset value, as a % of the overall sale price, of all Tabak-brokered sales for every year since 2007. For example, in 2019 the intangibles $ value represented nearly 90% of the overall value of the businesses sold by Tabak in that year, whilst in the post GFC period, the intangibles were only around 55% of the overall sale price. Now these figures can be skewed depending on the size and type of business we sell, the various levels of stock & plant compared to profitability etc. but most professionals we show this graph to are surprised at how highly intangibles are represented within the sale price of a business.
So, what are “intangibles”? Some people simply refer to them as Goodwill…. but we believe this term does not adequately capture the value of the intangible assets inherent in many businesses. In summary, intangibles are IP, Rights & Relationships – including but not necessarily limited to the below:
Intellectual Property
- Logo’s; branding, patents etc.
- Website & databases
- Systems & Processes
Rights
- Contracts & agreements (supply and sales)
- Franchises & Licenses
- IEA’s & Contractor Agreements
- Service Contracts & Distribution Agreements – formal/informal
Relationships
- Distributor
- Customer
- Staff
- Government
It is the intangibles that enable a business you purchase to “hit the ground running” and provide you a cashflow from the first day you take over, albeit working capital is required for some business types. Revenue is driven by a business’s customers, location, credibility, ability to deliver what it promises etc. etc. The intangibles value is the difference between having to start from a zero-base (no clients, no business, no intangibles, no revenue) and opening the doors on the first day of your ownership to welcome customers, staff, revenue, suppliers and profit.
So, the next time someone tells you that “goodwill isn’t worth anything” – perhaps you can show them this update. As always there is a variety of listings in this month’s summary all of which have varying degrees of intangibles – but in all cases the intangibles are a large part of why you choose to buy the business.
Damien Fahey; Partner
Tabak Business Sales, Christchurch