How to fire up your intangible capital
to reap maximum M&A deal value
One of the constants amid the on-going economic chaos of the last few years is a continuing interest from business leaders in mergers and acquisitions (M&A). Successive falls in global stock markets mean that, for those companies with a strong balance sheet, growth through acquisition is an achievable strategy.
But buyers should beware. M&A deals are inherently risky and anyone planning a merger or acquisition needs to ensure that their substantial investment pays off. One of the most serious stumbling blocks is that typical methods of deal evaluation are flawed because neither investors nor their advisors evaluate the intrinsic value of intangible capital – the non-monetary assets that cannot be seen, touched or physically measured, and so are hard to quantify or value, but which include most of the key drivers of deal profitability. Academic research and Hay Group’s work with clients over the past 10 years have repeatedly demonstrated the strong link between the intangible capital of a company and the future business performance of the merged entity.