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Newsletter - Statistics on technology intangibles and case study
This newsletter provides an update on our database developments and provides technology related statistics derived from purchase price allocation (“PPA”) studies. Technology value in relation to other assets is discussed. Also, statistics on economic useful life of technology is shared. Finally, we discuss a case study on the use of ratios derived from PPA data for valuation purposes.
Technology related intangibles in PPA studies
Technology related intangibles appear 1,755 times in the PPAnalyser database. This represents 25% of the total amount of PPAs recorded in the database. Technology is the third most frequently identified intangible asset included in PPA studies behind customer relationships and trademark intangibles. The average Technology related intangible value compared to total assets is 17%. This ratio varies per industry. The graph illustrates the percentage per industry. The highest percentage is observed in the Manufacturing industry and the lowest percentage is observed in the Services and Wholesale Trade industry.
Economic useful lives of technology related intangibles
The economic useful life of technology intangibles is disclosed in 1,476 records of the PPAnalyser database. This represents 40% of the total amount of economic useful life records. The economic useful life of technology is third most frequently disclosed behind of both customer relationships trademarks and trademark related intangibles. Of the definite useful life of technology the median economic useful life is 5 years. The median varies per industry as illustrated in the graph. The highest economic useful life for technology is observed in the Manufacturing industry and the lowest economic useful life is observed in the Retail Trade industry.
Case study - Second valuation method for technology related intangibles
Softco S.A. (”Softco”) is interested in technology related intangible assets of one of its competitors (”Toolco”). The technology is related to the main product of one of the divisions of Toolco for which financials are publically disclosed. Softco would like to have a high-level indication of the value of the technology. There are no historical asset transactions of comparable technology and traditional valuation techniques result in a relatively broad range. As an alternative approach, the technology-related-intangible-assets-to-total-assets ratio derived from publically available PPA studies of target compananies comparable to Toolco's division is considered. The use of this second method, provides Softco additional direction on what the technology related assets could be worth.
PPAnalyser database update
This month, PPAnalyser has crossed the 7,000 PPA milestone and now includes 7,116 records. Besides PPA disclosures, we now have 3,695 publically disclosed Economic Useful Life records and 1,397 discount rates. We are proud of this new milestone which we have achieved after 6 years of dedication. With an increasing interest in our database, we look forward to continue to improve our platform and add the next 7,000 disclosures.
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