March 11, 2025
For mid-sized businesses in the U.S. and Canada, accurately valuing intangible assets can be one of the most complex aspects of a merger or acquisition (M&A). Unlike tangible assets such as equipment and real estate, intangibles — like brand reputation, intellectual property, and customer relationships — are harder to quantify, yet they often represent a significant portion of a mid-sized company’s value.
Woodbridge – A Mariner Company has more than three decades experience helping mid-sized businesses understand the challenges in valuing intangible assets, which is essential for business owners looking to sell, acquire, or grow through strategic M&A activity. We distill the key learnings from our 30-plus years of experience for here…
Intangible assets fall into several categories, including:
Intellectual Property (IP): Patents, trademarks, copyrights, and trade secrets, including:
These assets contribute significantly to a business’s competitive advantage but are, by way of their intangible nature, difficult to assign a definitive market value.
At Woodbridge we’ve found that mid-sized business owners face several challenges when valuing the intangible assets of their company. These typically include:
Unlike tangible assets, which can be appraised based on comparable market transactions, intangible assets often lack a standardized benchmark. This is especially true for mid-sized businesses, where proprietary knowledge or brand value may be unique within their niche market.
Valuation professionals commonly use three main approaches, which can be difficult to apply to intangible assets:
Each of these methods involves assumptions and estimations that can lead to varying valuations depending on the expert conducting the analysis.
Both U.S. and Canadian businesses must adhere to specific accounting standards, such as Generally Accepted Accounting Principles (GAAP) in the U.S. and International Financial Reporting Standards (IFRS) in Canada. These frameworks require businesses to periodically assess the fair value of intangible assets, particularly in M&A transactions. However, discrepancies between book value and market value often create challenges in negotiations.
For businesses in sectors such as technology, healthcare, and manufacturing, intangible assets — especially intellectual property — can quickly become obsolete due to innovation or shifting industry trends. Accurately forecasting the long-term value of these assets is difficult, yet crucial for both buyers and sellers in M&A deals.
Goodwill represents the excess value paid over the fair market value of a company’s net assets, often linked to brand strength, customer loyalty, and/or operational synergies. However, the estimation of goodwill can be highly subjective, and its value may fluctuate post-transaction depending on integration success and business performance.
These challenges in valuing intangible assets can be incredibly daunting to first-time sellers, but can be made easier by following best practices. In general, these include:
Specialized valuation professionals like Woodbridge, which has years of experience in mid-sized M&A transactions, can provide an objective assessment of intangible assets, thereby reducing risk and ensuring fair deal terms.
Keeping detailed records of IP rights, brand investments, customer contracts, and employee agreements strengthens valuation credibility and eases due diligence.
Using a combination of income, market, and cost approaches provides a more comprehensive understanding of an asset’s value and helps mitigate subjectivity. An expert M&A advisor experienced in the mid-market will be able to assist in these valuation methods.
Conduct periodic internal valuations to track changes in asset value over time, which can be useful for strategic planning and potential future transactions. Again, an experienced mid-market M&A advisor is best-place to assist in these period valuations.
Valuing intangible assets in mid-sized businesses across the U.S. and Canada presents unique challenges, but with the right approach business owners can ensure they receive fair value during M&A transactions.
By leveraging expert guidance, maintaining robust documentation, and employing multiple valuation techniques, companies can navigate these complexities and maximize their business’s overall worth.
Speak to an M&A expert at Woodbridge for more information on how we value intangible assets when selling mid-sized businesses. Book your obligation-free appointment here.