The balance between tangible and intangible assets has changed, and as a result, the valuation of intangible assets has become more relevant, especially in the context of the knowledge economy, the SaaS industry, and the current wave of AI disruption.
This article is based on an L40 webinar featuring Julià Manzanas, Co-Founder and Chief Operating Officer of COFI Solutions, and Miguel Cedillo, Senior Managing Partner at the firm.
Manzanas and Cedillo explain how software, intellectual property, customer relationships, data, and organizational knowledge influence valuation outcomes in technology companies, especially in merger and acquisition (M&A) transactions.
Drawing on their experience valuing intangible assets in technology and M&A contexts, they explain why financial statements often fail to fully capture competitive advantage in software companies, and how intellectual capital surfaces during due diligence and negotiation when ownership changes hands.
Why intangible assets may determine the value of a tech company
Over the last few decades, the source of value in technology companies has gradually shifted from a sole focus on tangible assets (what a company owns physically) to what it has built intellectually, in what it is often referred to as the knowledge economy.
As a result, business valuation in technology increasingly depends on understanding intangible assets alongside traditional financial metrics.
In this context, software, data, intellectual property, and accumulated know-how are the elements that allow technology companies to scale, differentiate, and respond faster than competitors. Their difficulty to replicate is a key driver of asset value in technology companies.
One data point illustrates this shift clearly. In 1975, only about 17% of the S&P 500’s balance sheet value was attributable to intangible assets. By 2025, that figure will have reached approximately 90%.
Intangible assets: What are they?
From an accounting perspective, intangible assets are clearly defined. Under IAS 38, an intangible asset must be identifiable, non-monetary, and without physical substance.
In addition, the asset must be recognizable by the company, controllable, and capable of generating future economic benefits, which determine its contribution to enterprise value. On paper, this framework is straightforward. In practice, applying it to technology companies is more complex.
Financial reporting remains essential for understanding past performance, but it often provides only a partial view of how technology companies create and sustain value.
Why do intangible assets matter in SaaS?
For software businesses, intangible assets extend well beyond what typically appears in financial statements. They include software and proprietary code, patented technology, databases, trademarks, trade secrets, customer lists, licenses, internet domains, and marketing rights. Together, these elements support revenue generation, differentiation, and long-term scalability.
“Code is like writing a book. It is your copy. You hold the copyright. But beyond that, the algorithms embedded in the code are also very important,” said Manzanas. “And of course, the brand is also important because it allows customers and companies to distinguish you in the market.”
The challenge, according to Manzanas, is finding the value in what is invisible and understanding the vision of the buyer.
“Sometimes a company buys another company because the technological product is five years ahead. What are you buying? You are buying five years of technology development. These assets are often invisible, but when we make them visible, we can manage our companies better, define clearer goals, and create value in better ways.”
Intellectual capital: A framework to understand intangible assets
To make intangible assets usable in business valuation and M&A, Manzanas and Cedillo rely on the concept of intellectual capital, which organizes intangible assets into categories that reflect how value is created and sustained inside a company.
The weight of each category varies by industry and by the specific circumstances of the company.
Customer capital
Customer capital captures the value from a company’s relationship with its customers. This includes customer loyalty, customer contacts, brands, market presence, and ongoing relationships. It also includes operational elements such as return policies, response times, product quality, and the way customers interact with the business through sales and support teams.
In M&A, customer capital often plays a central role. In some transactions, buyers are not acquiring a product at all; they are acquiring access to customers, markets, and commercial relationships.
For instance, as Manzana said, “you can buy a company only for the relationships with institutions, or you can buy a company for the customers, even if you are not interested in the product. The product, of course, has value, but you might be buying a certain company mainly for its customers.”
Human capital
Human capital refers to the knowledge, skills, and capabilities of the people inside the organization. This includes experience, know-how, creativity, problem-solving ability, communication skills, motivation, and adaptability.
Human capital is powerful but fragile. Its value remains with the company only as long as key people stay. This is why buyers focus closely on talent retention, dependency on specific individuals, and the presence of key knowledge carriers.
The importance of human capital is also reflected in what is commonly known as an acquihire transaction, where the primary rationale for an acquisition is talent rather than technology, products, or revenue. In these deals, buyers are effectively acquiring a team’s skills, experience, and execution capability, often to accelerate product development or strengthen internal functions. As value is tied to people, retention structures, incentives, and cultural alignment are critical to preserving that value post-acquisition.
Structural capital
Structural capital is the part of intellectual capital that remains with the company even if people leave. It includes business and strategic plans, organizational structure, internal processes, financial systems, IT infrastructure, software, patents, copyrights, trade secrets, and documented procedures.
For software and SaaS companies, structural capital is often the most critical category. It is where proprietary code, system architecture, and embedded technical knowledge live, allowing the company to scale independently of specific individuals.
Strategic alliance capital
Strategic alliance capital reflects the value created through external relationships. This includes supplier agreements, partnerships, distribution channels, institutional contacts, and system integrations.
In acquisitions, strategic alliance capital can materially influence value when a buyer sees clear synergies or depends on those relationships to execute a broader strategy.
How to value intangible assets
Valuing intangible assets requires a structured approach that connects development effort, growth potential, and transferability.
Manzanas and Cedillo do not treat intangible asset valuation as a subjective exercise. They rely on a methodology designed to make intangible assets analyzable and comparable in M&A contexts.
Valuation often begins with expense allocation and the replacement cost method, which estimates what it would take in time, capital, and expertise to rebuild key intangible assets. This cost approach helps establish a baseline value, particularly for software, systems, and customer relationships that would be difficult to recreate quickly.
Buyers also consider elements of the income approach, evaluating how intangible assets support future performance and cash flows attributable to the business under new ownership. A company with proven revenue, an established customer base, and scalable systems presents a different risk profile than an early-stage business.
Finally, buyers assess how transferable that value is. Explicit knowledge embedded in code, systems, and documented processes transfers more easily than tacit knowledge held by individuals. Statistical factors and multiples are applied after this analysis to define a fair value range.
In M&A, price is negotiated, but fair value could be grounded in how durable and portable the company’s intangible assets really are.
Using intangible assets as a valuation and negotiation tool
Clear and disciplined intangible asset management gives founders a way to articulate what truly drives value in their business. Financial metrics describe performance, but they rarely explain why a company is difficult to replicate.
When founders can clearly articulate the strength of their software, intellectual property, customer relationships, and know-how, valuation discussions move beyond headline numbers to the fundamentals that support long-term value.
Understanding where value actually resides helps assess how much of it will remain after the transaction closes, whether in the code, the systems, the people, or the partnerships. It also surfaces common potential risks early on, such as reliance on key individuals.
In negotiations, intangible assets help create alignment. Financial statements explain the past and the present performance of a business, and to some extent its sustainability; but intangible assets provide a lens through which to frame its future potential.
L40 works with technology founders to translate intangible assets into clear, defensible value during M&A processes, ensuring negotiations reflect what truly drives the business forward.
