Intangible Capital Is The Real Capital

Prescient Strategists had the opportunity to attend the AM&AA conference this past July. We had a great time, met lots of great people and heard lots of great things taking shape in the world of mergers and acquisitions. If there was one thing that stood out most clearly to us, it was the industry’s new found appreciation for intangible capital.

Intangible capital was called out as what truly underlies every good organization. It was defined as culture, leadership, interpersonal relationships, the employee workforce and a host of other ‘assets’ that truly make up the value and success of very firm. The challenge, particularly in the M&A space is that none of these sit on the balance sheet.

We’ve always understood the importance of the intangibles at Prescient Strategists, so it was very timely for unto be the conference as this type of work finds its way into M&A. We saw some great tools being put into place. Tools that will help you diagnose all aspects of your organization. Intangibles included. This diagnostic will help organizations flag issues early. It will allow you to maximize your returns and your deal flow if you use it in the due diligence phase. It’s a brilliant tool and we’re excited to see it gain traction in the industry.

We’re excited for a number of reasons. Particularly because we believe in it, but also because we believe in the firm behind it, Corporate Value Metrics.  They’re on to something and we’re excited to be at the forefront with them. Culture kills deals, and as Peter Druker once said, it eats strategy for breakfast/lunch. Yet, it’s been ignored for years simply because its difficult to quantify and to get on a spreadsheet. But that’s changing, and the recognition of its importance has grown. Companies are being acquired now solely because of their culture and the people.

The reason is simple, it’s that important. Especially in today’s world of business. Efficiencies have been gained, expenses cut, and operations have become streamlined. What differentiates most organizations today is talent and culture. If you want top talent, you need a high performing culture. If you want a high performing culture, you need leaders that get it.

Talent swarms to good places with good cultures. It’s no longer just about the money. That’s just table stakes. What sets companies apart is the intangibles.

So let’s get with it and get on it.

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