May

Customer Data: The Intangible Asset You Did Not Realize You Have

Customer data is more than just addresses, phone numbers, zip codes, and work phones. In the age of programmatic media buying, customer data is quantified and codified down to screen behavior, social behavior, geo-location, favorite foods, favorite vacation spots, and much more. The evolution of customer data is the major driver behind creating business value and yet one of the most elusive.

Jahani and Associates analyzed over 500 M&A transactions among technology giants. We determined that 100% of the marketing and advertising acquisitions were driven by customer data capabilities. Technology giants use customer data to improve media buying. The acquired customer data capabilities:

Increased the number of customer data interfaces for the acquirer. For example, Alphabet’s acquisition of Famebit.
Increased the processing power of the acquirer’s customer data. For example, Alphabet’s acquisition of DeepMind, which provides deep learning solutions. Ray Kurzweil, director of engineering at Google, said that he wants to build a search engine so advanced that it could act like a “cybernetic friend.”

Companies seeking to maximize their value in the technology space must intimately understand their data and how it can be used to improve both collection and processing to generate insights. Jahani and Associates use our experience in tech M&A and investment banking to understand how our clients will increase their competitive advantage around customer data.

We have developed this expertise from serving large $100 Million technology clients and partnering with large VC firms. Our findings consistently show how successful customer data strategies overlap with either a lucrative business model or the business model of a strategic partner. Our three-step process that identifies, develops, and monetizes intangible assets will measure your competitive advantages, such as customer data monetization. This provides consistent and repeatable results for maximizing value.

You can learn more about our three-step process in the below articles.

Part 1: Identifying Intangibles In Ad Tech M&A Value

Part 2: Developing Intangibles In Ad Tech M&A Value

Part 3: Monetizing Intangibles In Ad Tech M&A Value

Jul

Part 3: Monetizing Intangibles in Ad Tech M&A Value

Part 3

Monetizing Intangibles in Ad Tech M&A Value

In this article, we will briefly explain how to monetize intangibles.

In the first two articles of this series, Identifying Intangibles in Ad Tech M&A Value and Developing Intangibles in Ad Tech M&A Value, we specified how you, the business owner, can identify and develop your company’s most valuable intangible assets to maximize your value.

In any M&A deal, sellers highlight the importance of their intangibles so the buyer can use them to create a competitive advantage. The third step in this process, learning how to monetize your business’ intangible assets, is where you reap the fruits of your labor. This step occurs when the buyer pays a price for the intangibles you have identified and developed. This includes the steps leading up to the sale, such as valuation, negotiation, pitching, and due diligence. So how do you monetize intangibles?

How to Monetize Intangibles When Selling Your Company

An M&A valuation can be conducted in several ways, including through a business appraisal or the valuation of a public company’s stock. The valuation of your company often amounts to a number that is negotiated between the seller and the buyer. Middle-market companies in particular possess a range of values based on the buyer’s profile. Fair market valuation is the most common valuation technique.

Fair market valuation occurs when you determine how similar businesses have sold based on multiple types and multiple factors. Multiple types include earnings before interest, taxes, depreciation, and amortization (EBITDA), annual recurring revenue (ARR), and, in some cases, book or tangible asset value. Multiple factors (referred to as 3X, 4X, or 10X) simply identify the number you agree to multiply the selected factor by to determine the valuation number.

Obviously, multiple types and factors depend on industries with similar characteristics to the company being valued. For example, industry growth, the strength of the management team, competitive advantages, access to suppliers, and access to buyers can all influence multiple types and factors.

How to Use ASC 805 to Maximize Your Valuation

The Accounting Standards Codification (ASC) 805 allows the business owner to understand how the expected purchase price can be broken down based on the transaction’s fair market valuation and associated purchase premium or goodwill. In the ad tech industry, the amount paid for goodwill makes up, on average, 70% of the purchase price. This means, for example, that a company with a fair market valuation of $100 and 70% goodwill was purchased for $170.

At J&A, our banking practice conducts detailed M&A studies of goodwill and purchase price allocation to understand why companies command a premium and how business owners can make sure they land at the top of valuations when selling their businesses. After looking at over 500 M&A transactions executed by technology giants over a six-year period, we segmented purchases by industry and certain goodwill parameters, narrowing our study to 34 purchased companies. These 34 ad tech M&A transactions completed at the greatest premiums had the following two things in common: the target company increased the data interfaces of the acquiring company and the target company increased the data processing power of the acquiring company.

Data interfaces and data processing power are both intangible assets. These intangibles were systematically identified and developed by the business owners over time before they sold their companies. The monetization of those assets became effective when the companies were purchased at higher than average premiums.

This analysis becomes the cornerstone of an effective M&A strategy. Armed with the framework of identifying, developing, and monetizing intangible assets, business owners have a predefined plan they can take to increase their company’s value.

As a business owner, you should always study different purchase premiums in your industry to identify drivers that will create the highest return for your business. Using ASC 805 principles to uncover M&A value allows you to create a roadmap that will help you land on the high end of valuation because it is a scientific way to tie your valuation to intangible assets.

The Takeaways of Intangible Asset Monetization

Intangible assets can only be monetized if you have measured them in-depth. There is an infinite number of intangible assets you can identify, develop, and monetize.

As a business owner, you must determine which ones you can leverage most effectively. Trusted advisors can help you create a clear vision and strategy to maximize your company’s value. The role of intangible assets in M&A markets will increase over time. The most successful companies will use the information presented in these articles to maximize the value of their company.

Part I: Identifying Intangibles in Ad Tech M&A Value >
Part 2: Developing Intangibles in Ad Tech M&A Value >

Photo by Vincent Tantardini on Unsplash

Dec

Cornell Systems Seminar: Using Systems Engineering to Maximize Corporate Value by Measuring and Developing Intangible Assets

Cornell Systems Seminar

Using Systems Engineering to Maximize Corporate Value by Measuring and Developing Intangible Assets

The rise of intangible assets is well underway. Since 1995 and the dot-com boom, the value of companies has shifted from their financial statements and into their intangible assets. The narrow definition of intangible assets by regulators and investors causes innovative companies to be consistently undervalued. This undervaluation exacerbates the difficulty innovators have when aligning their competitive advantages, such as operational efficiencies, competitive business combinations, and cutting-edge technology with the business needs of a market. Systems engineering represents a powerful framework for solving this problem.

Joshua Jahani is a Cornell alum, NYU lecturer, and owner of Jahani and Associates, an investment banking firm focused on identifying and developing a company’s intangible assets to maximize its value. The firm’s Intangible Asset Methodology™ (IAM) is built on systems engineering principles to identify, develop, and monetize intangible assets across a variety of verticals. Utilizing proven qualitative and analytical skills driven by business objectives and up-to-date technology, he has spearheaded the movement towards rapid evolution and sustainable growth using rigorous profitability, ROI, and TCO analysis for organizations of all sizes. Working with exciting startups in digital advertising or large Fortune 500 companies keeps him traveling all over the world.

Joshua Jahani earned his M.Eng. in Systems Engineering from Cornell University in 2012 and teaches courses on strategy, finance, and entrepreneurship at NYU. His current research interests are intangible assets, goodwill calculation and sustainability, the customer franchise value in subscription businesses, and value-based healthcare systems and technology. He has a passion for uncovering how to create corporate value that is not shown on financial statements.

Aug

Identify, Develop, and Monetize Your Intangible Assets

Jahani and Associates utilize a proprietary Intangible Asset Methodology™ (IAM) to help our clients identify, develop, and monetize their most valuable intangible assets. We recently led a Cornell Seminar on the same topic.

Intangible assets take work and time to develop into the premium commanding, goodwill-driving assets that maximize value in capital raises, M&As, and other scenarios. Think about a platform that boasts an above-average amount of time users spend on the technology per day. Such an intangible asset will command a premium, but only if it is identified and measured. Being able to measure this intangible asset (users spending more time on your platform than others) is work in and of itself. Some technological sophistication is required.

Developing the intangible asset takes the longest time out of the three steps:

Sticking with the same example of time spent on a platform per day, the theoretical firm in question must determine why users are spending more time on their platform, and then they must find ways to increase the user’s positive experience inside this intangible asset. Does the user want more videos? More pictures? Will the user share more on your platform when the colors are brighter? All these questions require testing. They require a rigorous process of engineering and business acumen.

Developing intangibles inside the IAM™ is done with consideration of those that generate the highest premium. This is always determined as part of the preceding identify phase. These two phases build on each other to empower the third and final phase: monetize.

Monetizing intangibles is done through investment banking scenarios. This can be done when bringing a company to market for an M&A, when performing investor relations for publicly traded companies, when raising capital from VCs, or a variety of other scenarios. This is when J&A takes its powerful, data-driven story to command a premium in the marketplace.

Jul

Startup Valuations and Intangibles: Take Back the Power

Startups are at the mercy of investors when it comes to seeking large amounts of capital for scaling their business. The solution? Startups must identify how their intangible assets will be monetized in a respective market through intelligent investment banking analysis and services.

Owners are in a better position to value their intangible assets and competitive advantages than any investor. This is because the real value of a startup isn’t found in the financial statements, financial terms, or traditional financial metrics that are used by investors on a regular basis. Startup assets are fundamentally intangible. These intangible assets are always unique to an industry and in many cases unique to a company.

Examples of these intangible assets are daily active users (DAUs), customer data to improve pricing, sales funnel optimization, and costs of customer acquisition.

Startups must work to identify, develop, and monetize their intangible assets by generating a narrative for predictable and repeatable processes. Additionally, they need a pro forma that allows the startup to monitor and improve corporate performance based on intangible metrics.

When these two goals are met, the power is in the owner’s hands. Now there is a clear way to define value, show how the market responds to it, and then maximize it to increase the value of the company.

Contact Jahani and Associates today. Take back the power and no longer be at the mercy of investors when seeking funds.

Read our next article: Identify, Develop, and Implement Intangible Assets to Maximize Your Value

Jul

M&A Insights: Use the Power of Intangibles to Maximize Your Value

M&A Insights: Use the Power of Intangibles to Maximize Your Company Value

M&A Insights: Two kinds of intangible assets

In the world of investment banking, there are two kinds of intangible assets. The first is known as “identifiable” intangibles. These are things like patents, trademarks, copyrights, and customer relationships. In short, these are intangibles that GAAP and FASB have determined are consistent enough to be subject to specific valuation rules. When valued these assets are referred to as “intangible assets.”

The second category of intangible assets is known as “unidentifiable” intangibles. These are essentially everything else. Examples include selection algorithms (Netflix, Amazon, and Hulu), operational synergies, talent, and other business combination advantages. When valued these assets generally fall under goodwill. Goodwill is defined as the amount over fair market value an acquirer pays for a target company.

These two kinds of intangibles play a significant role in the valuation of a company. In fact, Jahani and Associates analyzed over 500 M&A transactions among tech giants such as Apple, Alphabet, Facebook, and Microsoft to determine exactly how much value was placed in these categories. The results were astounding.

Intangible assets represented 22% of the money spent on acquisitions for these tech giants. Goodwill accounted for 77% of the money spent on acquisitions from 2010 – 2016. Together, identifiable and unidentifiable assets made up 99% of the purchase price for all acquisitions made by tech giants from 2010 – 2016.

M&A Insights: Maximizing a company’s value

These results are astounding, to say the least. They are astounding for two reasons: 1) They provide a clear and measurable path to maximizing a company’s value and the likelihood of being acquired by a tech giant and 2) they provide insight into why a tech giant will buy targets based on their business model.

M&A Insights: The way a company uses this information, and the unique value Jahani and Associates brings to our clients’ business, is based on three factors:

The industry vertical of the target
The specific business processes that are congruent with those of selected acquirers
A proprietary and data-driven investment banking process

Owners of candidate businesses must consider these factors when building their business. The considerations play a significant role well outside of the traditional investment banking timeline. Meaning the business owner must identify, develop, and implement these intangible assets more than 12 months before they plan to sell their company.

Read our next article: Identify, Develop, and Implement Intangible Assets to Maximize Your Value

Jul

The Intangible Asset You Didn’t Know You Had: Customer Data

Customer Data: The Intangible Asset You Didn’t Know You Had

Customer data is no longer just phone numbers, addresses, zip codes, and work phones. In the age of programmatic media buying, customer data is quantified and codified down to screen behavior, social behavior, geo-location, favorite foods, favorite vacation spots, and much more. The evolution of customer data is the major driver behind creating business value and yet one of the most elusive.

Increased number of customer data interfaces for the acquirer
- For example: Alphabet’s acquisition of Famebit
Increased processing power of the acquirer’s customer data
- For example: Alphabet’s acquisition of DeepMind. DeepMind provides deep learning solutions. Ray Kurzweil, Director of Engineering at Google, said that he wants to build a search engine so advanced that it could act like a “cybernetic friend.”

Companies seeking to maximize their value in the technology space must intimately understand their data and how it can be used to improve both collection and processing to generate insights. Jahani and Associates uses its proprietary Intangible Asset Framework to understand how our clients will increase their competitive advantage around customer data.

We have developed this framework from serving $100 million technology clients and partnering with large VC firms. Our findings consistently show how successful customer data strategies overlap with either a lucrative business model or the business model of a strategic partner. Our three-step process that identifies, develops, and monetizes intangible assets will measure your competitive advantages, such as customer data monetization. This provides consistent and repeatable results for maximizing value.

Identifying Intangibles in Ad Tech M&A Value

Jul

Digital Health: Competition for VC Dollars

Digital health is an exciting area, ripe with growing Medicare reimbursements, new technologies, and real potential to improve the frustrating healthcare consumer experience in the USA.

Jahani and Associates analyzed over 200 M&A transactions and equity investments in digital health from 2013 to 2016. Our results showed a 20% decrease in investment funds per company in 2016 versus 2015. Despite a 604% growth in Medicare reimbursements from 2006 to 2016 and a 62% increase in telehealth consultation over the same period, digital health companies must carefully develop their competitive advantages to both increase access to capital and decrease their cost of capital.

By analyzing companies that maintain competitive advantages such as Welltok, SnapMD, Pager, and Teledoc we elicited two opportunities for creating value:

There are opportunities for digital health returns, but companies must respond to a saturating market by focusing on improving the customer experience while at the same time optimizing the business model of existing healthcare giants.

Jahani and Associates recommends digital health companies focus on four major intangible assets to accomplish the value goals listed above:

Optimize member access via subscription contracts, members per client, providers per network, and the visits offered to members based on contracts.
Create a revenue model driven by customer engagement. Digital health companies are much closer to their consumers than traditional healthcare companies.
Create a scalable and flexible business model that responds to seasonality, subscription fees, and access fee changes.
Consistently provide regulatory compliant solutions in response to existing and expected reforms such as HIPAA one and two, HITECH, ACA, and BPCI.

This is all predicated on the ability to identify, develop, and monetize intangible assets using the Jahani and Associates’ intangible asset framework.

Read our article: Identify, Develop, and Implement Intangible Assets to Maximize Your Value

Customer Data: The Intangible Asset You Did Not Realize You Have

You can learn more about our three-step process in the below articles.

Part 3

Monetizing Intangibles in Ad Tech M&A Value

In this article, we will briefly explain how to monetize intangibles.

How to Monetize Intangibles When Selling Your Company

How to Use ASC 805 to Maximize Your Valuation

The Takeaways of Intangible Asset Monetization

Cornell Systems Seminar

Using Systems Engineering to Maximize Corporate Value by Measuring and Developing Intangible Assets

Identify, Develop, and Monetize Your Intangible Assets

Jahani and Associates utilize a proprietary Intangible Asset Methodology™ (IAM) to help our clients identify, develop, and monetize their most valuable intangible assets. We recently led a Cornell Seminar on the same topic.

Startup Valuations and Intangibles: Take Back the Power

Startups are at the mercy of investors when it comes to seeking large amounts of capital for scaling their business. The solution? Startups must identify how their intangible assets will be monetized in a respective market through intelligent investment banking analysis and services.

M&A Insights: Use the Power of Intangibles to Maximize Your Company Value

M&A Insights: Two kinds of intangible assets

M&A Insights: Maximizing a company’s value

Customer Data: The Intangible Asset You Didn’t Know You Had

Digital Health: Competition for VC Dollars

Digital health is an exciting area, ripe with growing Medicare reimbursements, new technologies, and real potential to improve the frustrating healthcare consumer experience in the USA.

Jahani and Associates (J&A) is a global professional services firm headquartered in New York City. J&A has deep connections in the Middle East, Southeast Asia, Latin America, and North America.

The firm provides growth services including investment banking advisory, financial services, and revenue growth services to clients all over the world.

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