In a technology M&A deal, whether you are acquiring or selling a tech or software business, valuation rarely hinges on a single dimension.

Financial performance, growth efficiency, and cash flow durability remain the backbone of any transaction. In practical terms, this means metrics such as revenue and ARR, retention as a proxy for revenue quality, margin structure, and capital intensity continue to anchor how buyers price risk.

However, alongside these tangible indicators sits another layer of value, one that does not always surface cleanly in financial statements and may even remain invisible if it is not properly understood or articulated: intangible assets.

Put simply, intangible assets are the non-physical elements a company has built that enable it to generate revenue, scale efficiently, or defend its market position. In technology companies, this typically includes proprietary software, intellectual property, datasets, customer relationships, brand equity, and internal systems or processes.

Many of these assets do not fully appear in financial statements. Others are only partially captured through accounting treatment. Yet in a transaction context, they often influence how sustainable, transferable, and defensible a company's performance really is.

Understanding how tangible performance and intangible value interact, rather than compete, is key to interpreting how modern technology deals are ultimately priced. For founders in particular, recognising and articulating this invisible layer of value can meaningfully influence how buyers assess upside and risk.

Tangible performance mainly sets the valuation floor

When evaluating the opportunity to acquire a business, before any discussion of intellectual property or strategic upside enters the room, investors and acquirers start by looking at the fundamentals. These typically include:

• Revenue scale and growth trajectory
• Gross and EBITDA margins
• Net revenue retention (NRR)
• Rule of 40 
• Customer concentration
• Cash flow generation

These financial metrics ultimately determine whether a deal fits within an acquirer's investment thesis, its baseline valuation range, and, where relevant, its financing capacity (think LBOs). In this sense, they shape downside protection for both buyers and lenders.

This also explains why a company with weak financial fundamentals will struggle to command an above-market valuation, or even sustained interest, purely on the strength of its technology or brand.

However, once those fundamentals are established, buyers begin looking beneath the performance. That is where intangible assets have the opportunity to influence perception and pricing.

Why intangible assets carry weight in software transactions

Two companies may show similar revenue, growth, and margin profiles on paper. Yet one may command a higher valuation than the other. The difference often lies in how durable and transferable their performance really is, and how well their story aligns with an acquirer's strategic priorities. That is the kind of value reflected in a well-structured narrative of intangible value. 

In software businesses, value creation is embedded in systems rather than physical infrastructure. Recurring revenue is supported by intellectual property, scalable processes, integrations, switching costs, customer success frameworks, and brand trust. None of these sit neatly on a balance sheet, yet all shape how defensible revenue will be post-acquisition.

From a buyer's perspective, the question is not only how the company has performed, but how repeatable that performance will be under new ownership.

A practical way to categorise intangible value

To analyse intangible assets more systematically, specialist consulting teams such as COFI solutions, often group them into four different components of intellectual capital. This helps structure due diligence and isolate risk.

• Customer capital

Customer capital reflects the value embedded in commercial relationships.

This includes contracted recurring revenue, retention dynamics, expansion pathways, brand loyalty, and market access. In many technology acquisitions, buyers underwrite the predictability and growth potential of the customer base as much as the product itself.

There are transactions where access to customers or distribution is the primary driver. A buyer may already have comparable technology but lack penetration in a specific vertical or geography. Acquiring that customer ecosystem can accelerate growth far faster than building it organically.

• Human Capital

Talent concentration is another defining characteristic of software companies. This is why the term “acquihire” is often used to describe acquisitions primarily driven by the desire to secure talent, a dynamic more common in lower- to mid-market transactions.

From a deal standpoint, engineering expertise, product vision, and institutional knowledge often sit with relatively small teams. This makes human capital highly valuable, but also fragile.

Key considerations in M&A transactions typically include founder dependency, retention risk, leadership depth, and cultural alignment. If too much knowledge sits with a handful of individuals, buyers will structure protections accordingly.

In acquihire scenarios, for instance, retention structures and incentive packages become central to preserving deal value.