Briggs AnalyticsDoes licensing my company's data hurt the sale price of the business?
In this article
What acquirers actually askWhy non-exclusive does not hurtWhy exclusive canHow to structure itTimingWhat acquirers actually ask
Three things, in diligence: is there any contract that limits what we can do with the company's data; did any customer data leave the building; and is there any ongoing obligation. A non-exclusive license of a scrubbed copy answers all three cleanly: no limit on the company, no customer identity left, no obligation beyond the agreement's own terms.
Why non-exclusive does not hurt
Because nothing was given up. The company still owns and uses its records, can still license them again, and the acquirer can too. The license is a completed contract, like a lease or a vendor agreement, that sits in the data room. In practice, acquirers of companies under $20 million in revenue almost never price the operating history separately, so the license was money the owner would otherwise have left behind.
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An exclusive license means the acquirer cannot license the same records to anyone else and, depending on the agreement, may have obligations to the buyer after a change of control. That is a real limit and some acquirers will price it. The exclusive premium (four to five times, per one platform's published research) often outweighs it, but it is a decision to make with your deal advisor, not by default.
How to structure it
Non-exclusive. Scope limited to the operating record, with customer identity removed. No change-of-control clause that binds the acquirer, or one that simply assigns the agreement. A clean deletion schedule for the raw copy. Put the agreement in the data room with the other contracts. The clauses, in plain English.
Timing
Before the letter of intent is easiest. During diligence is possible with disclosure and the acquirer's agreement. After close, the decision belongs to the acquirer. Licensing vs selling, in one table.
In short
- A non-exclusive license of a scrubbed copy almost never affects sale price. The company keeps its records.
- Acquirers of small and mid-size companies rarely price the operating history separately; the license is money you would have left behind.
- An exclusive license limits the acquirer and must be disclosed. Decide it with your deal advisor.
- Close the license before the letter of intent when you can.
Questions owners ask.
My broker says it will scare buyers.
Show the agreement. Non-exclusive, scrubbed, no obligations on the company. Most brokers have not seen one yet and relax when they read it.
Will the acquirer want the license money?
No. It was paid to the company before the sale, like any other revenue, and is accounted for the same way.
What if the acquirer wants exclusivity later?
They can negotiate it with the buyer after close, or license to a different buyer. A non-exclusive license leaves every option open.
