If you are involved in Merge and Acquisition activities, do you consider the value of the data held within the business?
If not, then read on. You could be leaving money on the table!
A client recently verbalised the concept which goes a long way in the revelation the market is going through on recognising data value.Â
If Newco was formed and bought $100m of data, it would be reasonable to say that on Day 1, that business was worth $100m; $100m in data Value. It's Enterprise Value, multiples of revenue of profit etc. is nil as there is no trading and nothing to value.
That same Newco after X years generates a return from the data: If that company was to generate $5m in profit from the data, and 10x profit was the typical multiple used for companies in that sector, then the Enterprise Value would be 10x $5m = $50m.
Now ignoring data enhancement and data decay, it would absolutely be reasonable to say that company's value was the Data Value plus the Enterprise Value so $100m + $50m = $150m.
The Newco then generates data: Where most companies are today is that they have made or gathered data without the huge inconvenience of acquiring it; maybe through users of a platform or technology.
Additionally, their team have gathered data in the day to day operations. If they ended up with the same data set as the newco. and the same financial metrics, then why wouldn't the company be worth $150m! ($100m (Data) + $50m (EV) = $150m). It's just that we are not recognising the $100m!!
If you are considering a merger or acquisition, then contact @data valuation partners to gain a defensible financial valuation of the data.Â
