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Intangible Assets & Intellectual Property

It was a recent article in the NZ Herald that made me think about the changes that have taken place in businesses since the1980s.

Date Created: 27/5/2016

In my mind and in my car,
We can't rewind we've gone too far.

The Buggles – Video Killed The radio Star

It was a recent article in the NZ Herald that made me think about the changes that have taken place in businesses since the1980s. Paul Adams, CEO of EverEdge IP, notes that over the last 35 years the Western World has undergone a massive economic inversion. Here’s what he said.

“Last week I received one of those emails that kick your thinking into a higher gear. It contained four simple statements:

• Uber - the world's largest taxi company owns no vehicles.
• FaceBook - the world's most popular media owner creates no content.
• Alibaba - the world's most valuable retailer has no inventory.
• AirBnB - the world's largest accommodation provider owns no real estate.

“These four statements neatly capture one of the mega trends revolutionising the economy. Over the last 35 years the West has undergone a massive economic inversion.

“Corporate balance sheets, once cluttered with tangible assets such as property, plant and equipment have been inverted. Airlines don't own aeroplanes anymore. Hotels don't own their buildings. Car manufacturers are now outsourcing production lines.

“This of course begs the question: if all the heavy stuff, the tangible assets, are gone - what replaced it?

“The answer is both profound and simple: balance sheets today are dominated by intangible assets: brand, content, data, know how, confidential information, design, inventions, code - in short intellectual property.”

The article goes on to give examples of the changes and their effect on financial institutions.  Banks relying on security from tangible assets such as plant, equipment and real estate, most of which are becoming irrelevant to the business’s performance, will need to figure out how to ascribe value to the intangible assets of their customers.

This is a great article and I thoroughly recommend reading it.

Businesses don’t need Hard Assets to be Successful

With the evolution of technology many businesses are becoming less reliant on hard assets and less constrained by international borders. Here are a couple we have seeking cornerstone shareholder/s or qualified investors.

Skin Alive is a business currently seeking capital for international expansion.  It’s a classic example of a business with no tangible assets operating from Wanaka in the middle of the South Island of New Zealand and growing through marketing in the U.S., the U.K., Europe, and Asia. Exit strategy, trade sale of the brand.

Payport is another example of a client with few tangible assets looking for capital for expansion and a future trade sale. As online shopping continues to boom, shipping goods out to customers efficiently and getting paid remains a challenge. Payport addresses these problems with two products - an online freight booking aggregator and freight management system; and an online credit card payment gateway. Exit strategy – trade sale to one of its partner companies, freight, ecommerce, or online trading.

If you're interested in either of these Offers, or any others on our website, email or give me a call.

Valuing Businesses

At TBK Capital, when we’re raising loans or equity for business or property - see my previous newsletters Raising Equity for Business and Property and Debt Finance Options Available. Potential lenders and investors are obviously interested in the current “value” of the entity they’re about to be connected to.

The way to value a property is pretty much the same as it’s always been. Residential based on similar sales and commercial and industrial on yield – both of course qualified by location/position. Businesses are more difficult to value – especially if they are new.

Luckily valuing businesses is something we are very familiar with. So if you’re interested in raising equity or are looking to refinance, and you require a valuation, email or give me a call.

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The above investments are not offers of financial products that requires disclosure under the Financial Markets Conduct Act 2013 (Act) and are available only to wholesale investors as defined in Schedule 1 of that Act (other than any person who is only a "wholesale investor" under clause 3(3)(b)(i) or (ii) of Schedule 1 of that Act). They are intended for distribution only to selected people to whom, under the relevant laws, they can be lawfully distributed. They cannot be distributed in any other jurisdiction, or to any other people. They are not offers or solicitations in any jurisdiction in which such offers or solicitations are not authorised, or in which the person making such offers or solicitations are not qualified to do so, or to any person to whom it is unlawful to make such offers or solicitations. Any representation to the contrary would be unlawful. No action has been taken by any person that would permit a public offering in any jurisdiction where action for that purpose would be required.