When we think of hidden assets our minds might wander in the direction of assets literally hiding in an office or facility and going unnoticed. The reality is hidden assets are often used everyday and possibly by everyone in your company. To establish the appropriate term we need to first understand the two types of assets; 1) Current Asset, an asset typically consumed within a 12 month period, such as cash and inventory 2) Fixed Asset, an asset that generally provides benefit for more than 12 months, such as equipment and buildings.
The hidden asset we typically find in our Clients companies are fixed assets. We discover these assets while examining our Client’s company’s and find those hidden assets in their proprietary processes, software, and databases. Majority of the time these fixed assets are not on the company’s balance sheet and do not exists in accounting terms. Although these fixed assets are possibly the most valuable asset to a companies existence. Should a company not have those proprietary processes and/or systems they would arguably not sustain the revenues and profits generated by the company.
Meritage Partners was recently engaged by a client seeking to sell their company. During our initial review of the client’s company we found several hidden assets being utilized every minute of the day. Specifically, the founder of the company set out to develop an ordering system designed to retain sales people and improve ordering efficiencies. He accomplished exactly what he intended. Then, Meritage advised the client to carve out the ordering system into a holding company and license the system back to the operating company. As a result the client is pursing the sale of his operating company and retaining the ordering system which will continue to be licensed for a period of time and continue to generate residual income.
Brian T. Franco – Managing Partner of Meritage Partners