March 18, 2022
As per March 2022, MARKABLES lists 2.550 acquired software or digital assets, their values, valuation parameters, royalty rates, and more. Eighteen of these 2.550 exceed the value threshold of US$ 1bn (see list below).
Software is the key asset for many tech businesses today. Looking closer at how the software assets fit into the valuation of such businesses, we find wide differences. For the 18 cases, software accounts for 16% of enterprise value on average. The range goes from 1% to 40%. For some startups, the percentage may be even higher.
In relation to revenues, the value of the software asset is 1.3x current annual revenues on average. Assuming a 10-year useful life, the applicable annual royalty rate for these software assets would be in the area of 20% on revenues on average. “Winner” in the list is Mobileye where software value is 6.5x current annual revenues.
Digital tech businesses play a fast-increasing role in today’s M&A markets. However, comparing the software asset with other intangible assets, it is a rather “cheap” asset. In the MARKABLES database, the average value of an acquired software asset is US$ 48.5mn. This compares to US$ 218mn for product technology, US$ 153mn for customer relations, and US$ 125mn for trademarks/brands. Software development is relatively fast, and its deployment is easily scalable at very little cost. This is one of the reasons why software businesses typically enjoy very high valuation multiples.
MARKABLES is a commercial database for the valuation of intangible assets, with probably the widest selection of comparable cases. Comparable data related to software and other digital assets will be released in June 2022. The database is accessible under various plans, from flexible one-offs and long-term high-volume users. Please feel encouraged to find out if we are different, and why we are better.