In the past few years, intangible assets have accounted for up to 90% of the value of the average corporate transaction (M&A, PE, VC). This has been driven by the rise of the information, services and technology industries.
The most valuable assets that a company has are no longer the plant, equipment, land, or other physical assets. Rather the value is in patents, code, brand and the IP. There are well established accounting codes around how to value each of these intangible assets. The remainder of the difference between purchase price and a bottom up asset valuation is dumped into ‘goodwill’.
This is where you will currently find whatever value is currently being attributed to the data of an acquisition target. Stuck in goodwill; alongside other difficult to value creatures, such as customer loyalty and workforce capabilities. The case study below showcases this in a recent and significant corporate transaction.
Rappi is rapidly expanding across Latin America, and from the outside can look like just another food delivery company. However, they wouldn’t’ sport a $3.5 billion dollar valuation if that is all they did.
Instead they are trying to build an ‘ecosystem’ where the data they collect and analyse can go back to the individual restaurants to help them target their own customers better. It’s a risky, big play from Softbank and the other Rappi investors – but they are on board with rapid growth and figuring out how to profit later. Given that data is the defacto source of potential future value, is seems that Rappi’s investors are convinced that the value of data will continue to increase, and that they will be able to realise this value.
Many of the gig economy startups rely on data for revenue. However, this is one of the first times that a company is pitching the value of its data first and the value of what would appear to be its core business second. It once again shows that data valuation and data monetisation are key areas that enable fast growth across a number of industries.