Intangibles and goodwill are the most important assets in many businesses — and the most systematically undervalued in sale processes. Our view on why Spain has a structural problem with these assets and what sellers can do about it.
At Fundenza, we have been working on business valuations and M&A transactions in Spain for many years. And there is something we notice consistently: intangibles and goodwill are the most important assets of many businesses and, simultaneously, the most systematically undervalued in sale processes. Not because buyers fail to recognise them. But because sellers often cannot articulate them, and traditional valuation methods treat them as secondary considerations.
This is our view, built on hundreds of valuations and M&A processes: Spain has a structural problem with intangibles. That problem costs sellers money, complicates negotiations, and produces transactions that close below their genuine value.
What Are Intangibles and Why Do They Matter in Business Valuation
When we talk about intangibles in business valuation, we mean everything that generates value without having a physical form: brand equity, a loyal client base, long-term contracts, patents and intellectual property, internally developed software, proprietary processes and methodologies, online reputation, key human capital, exclusive distribution agreements. And above all, goodwill: the premium a buyer pays above the book value of net assets, precisely because they recognise that the business is worth more than the sum of its tangible parts.
In many services, technology, consultancy, or specialist distribution businesses, intangibles represent 60%, 70%, even 90% of total business value. Yet in Spain — unlike in Anglo-Saxon markets or Germany — there is a business culture that systematically underweights these assets when price negotiations begin.
The Problem with Classic Valuation Methods and Intangibles
The two most commonly used valuation methods in Spanish SME M&A are EBITDA multiples and discounted cash flow (DCF). Both share the same blind spot: if intangibles generate cash — which they always do, when genuine — they will be reflected in EBITDA or free cash flows, and the market will capture them through the multiple. But there is a significant «if» embedded in that statement.
The problem is that many intangibles in Spanish SMEs are not correctly documented or managed, making them invisible to an external buyer and therefore impossible to argue for when justifying a premium multiple. Real examples:
- A distribution company with exclusivity contracts that have never been formally renewed in writing — they operate on a handshake with suppliers of fifteen years standing. Those contracts have value, but without documentation, the buyer prices them at zero.
- An engineering firm with a proprietary project management methodology that differentiates it from competitors, but which has never been formalised in any manual or protected as intellectual property. The buyer sees a company that «works in a particular way» with no way to quantify what that is worth.
- A services business with an exceptionally high NPS and impeccable market reputation, with no systematised evidence: no client satisfaction surveys, no Google reviews strategy, no brand recognition studies. The buyer takes note but won't pay for something they cannot measure.
The pattern is always the same: the intangible exists and generates real value, but it is not documented in a way that an external buyer can incorporate into their analysis. And what cannot be measured cannot be defended in a negotiation.
Goodwill: The Premium Sellers Do Not Know How to Claim
Goodwill is the accounting and legal term for this value excess. When a buyer pays €4 million for a business whose net book value is €1.5 million and whose identifiable assets are worth €2 million, the remaining €2 million is goodwill. It is what the buyer pays for competitive positioning, track record, brand, customer relationships, and growth prospects.
The problem is that in Spain, many SME sellers spend decades building that goodwill — maintaining strong supplier relationships, treating clients well, developing their team — but arrive at the negotiation without knowing how to argue for it. When the buyer challenges the multiple, the seller has no concrete response, only the feeling that «my business is worth more than I'm being offered».
That feeling, without quantified argumentation, is weak in a negotiation. And experienced buyers know it.
Why Buyers Usually Win This Negotiation
There is a notable information asymmetry in Spanish SME M&A transactions. The buyer — particularly if they are a fund, a larger company, or someone with acquisition experience — arrives having analysed dozens of comparable businesses. They know what multiples are paid in the sector. They know which intangibles carry genuine value and which are decorative. They know what to probe in due diligence to expose the weakness of undocumented intangibles.
The seller, by contrast, typically sells their business once in a lifetime. They have profound knowledge of their business but limited experience translating that knowledge into valuation arguments. And this asymmetry produces a statistical outcome: businesses sold without specialist advisory typically close below their potential value.
How to Document and Present Intangibles Before Selling
Our consistent recommendation is that intangible preparation work must begin at least 12 to 18 months before initiating the sale process. Once the process starts, it is too late to build what should already exist.
- Formalise verbal or informal agreements. If you have exclusivity arrangements, stable collaborations, or preferred terms with clients or suppliers that operate informally, document these relationships in writing. The simplest form is not always a formal contract — sometimes a written email confirmation that the other party responds to suffices. What matters is having something tangible.
- Register and protect intellectual property. If your business has proprietary software, methodologies, operational manuals, designs, or unregistered trademarks, act now. A trademark registration or patent has a manageable cost and creates a legally defensible intangible.
- Build evidence of customer relationships. Satisfaction surveys, client retention rate analysis, repurchase data, documented case studies and testimonials: all of this converts «our clients are loyal» into a measurable claim a buyer can verify and value.
- Document key processes. A business whose operational knowledge resides exclusively in the founder's head carries a significant continuity risk. Buyers know this and price it in. Documenting processes, creating operational manuals, demonstrating the business can function without the founder — this is one of the most valuable intangibles, and often the hardest for the entrepreneur to see.
- Analyse and communicate brand value. There are established brand valuation methodologies — the royalty relief method, market comparables — applicable even to SMEs. The point is not academic; it is to have a structured argument ready when a buyer questions whether the brand has any value at all.
The Moment When Intangibles Decide the Price
We have seen transactions where the gap between a buyer's opening offer and the final closed price was 30%, 40%, even 60%. That gap does not close through negotiation alone. It closes through solid argumentation about intangibles: «this multiple is justified because we hold exclusivity contracts with five suppliers through 2028, because our client retention rate is 94%, because we have registered three trademarks in Europe, and because 85% of critical processes are documented and the team can operate without the founder».
That conversation is completely different from «I believe my business is worth more because I have built it over 25 years». Both statements are true. Only one works in a negotiation room.
Our Position: Intangibles Must Be Central to Any Sale Process
At Fundenza, we have long held that intangible analysis and documentation is not an optional supplement to the sale process — it is a core part of strategic preparation. Just as the information memorandum is prepared, the balance sheet cleaned, and results normalised, the business must prepare its intangible story: a structured, evidenced narrative of why the business is worth more than the sum of its tangible assets.
This is not about artificially inflating price. It is about collecting what the business genuinely deserves. And what the business genuinely deserves is, in many cases, buried in assets that no one has taken the time to document and quantify. That is the work we do at Fundenza.
Frequently Asked Questions on Intangibles in Business Valuation
What is the difference between identifiable intangibles and goodwill?
Identifiable intangibles are specific assets that can be separated from the business and valued individually: a registered trademark, a patent, an exclusivity contract, a client database. Goodwill, by contrast, is the residual premium that remains after valuing all identifiable intangibles and tangible assets. It represents synergies, reputation, and positioning that cannot be separated from the business as a whole.
Can intangibles be valued in an SME without hiring a specialist consultancy?
In many cases, yes. Rigorous intangible valuation requires specialist methodologies, but a business owner can accomplish much with well-organised documentation and internal data: client retention rates, written contracts, intellectual property registrations, pricing analysis. The starting point is organising what already exists.
How does goodwill affect the tax treatment of a business sale?
In a business transfer, goodwill is typically treated as a capital gain for the seller. For the buyer, acquired goodwill may be amortised for tax purposes in Spain under certain conditions — a factor that influences how buyers structure their preference between a share purchase and an asset purchase.
What if the buyer refuses to recognise goodwill?
When a buyer rejects goodwill, the negotiation becomes a debate about what actually generates that excess value. The most effective response is always documentary: showing, with concrete data, why the business will generate more cash in the future than historical EBITDA alone suggests. An independent valuation report prepared by advisors with M&A experience significantly strengthens the seller's position in this discussion.
How much can goodwill represent in a Spanish SME transaction?
It depends on the sector, size, founder-dependence level, and quality of documented intangibles. In well-positioned services businesses with recurring clients and low concentration risk, goodwill can represent 40% to 70% of the total transaction price. In industrial businesses with significant tangible assets, that proportion is generally lower — but it still exists and deserves to be defended.
