Intangible asset due diligence is the buyer's investigation of the assets that carry most of a target's value but sit outside its balance sheet: intellectual property, customer relationships, brand, data, software and key people. It tests whether each asset exists, whether the target owns it outright, whether it will survive the change of ownership and what it is worth. Done before signing, it changes the price, the deal structure and the warranties; done after completion, it can only explain the goodwill.
Last reviewed: October 2026. Written for UK targets: UKIPO, Companies House, the PSC register and UK GDPR apply; IFRS 3 and FRS 102 alongside. Not legal advice.
Request these ten areas from the seller in the first information request, and test each against an independent source where one exists.
| # | Area | What to request | Red flag |
|---|---|---|---|
| 1 | IP ownership and chain of title | IP assignments from founders, employees and contractors; employment and consultancy agreements; any university or joint-development agreements | Code, designs or content written by a founder before incorporation, or by a contractor, with no signed assignment |
| 2 | Registrations and renewals | Schedule of patents, trade marks and designs at UKIPO, EUIPO and USPTO, with owner, status, classes and renewal dates | Registered owner is a founder or a sister company; lapsed renewals; no UK mark for the core brand |
| 3 | Licences in and out | Every licence the target relies on and every licence it grants, with term, exclusivity, assignment and change-of-control clauses | A critical licence that terminates, or needs consent, on a change of control |
| 4 | Open-source exposure | Software bill of materials or a code scan, the licence of each component and the open-source policy | GPL code in software the target distributes, or AGPL code in software it distributes or offers as a network service |
| 5 | Customer contracts, concentration and churn | Top 20 contracts; revenue by customer for three years; cohort retention; renewal and termination terms | One customer above 10% of revenue, or top customers able to leave on a change of control |
| 6 | Key-person dependency | Organisation chart, service agreements, notice periods, restrictive covenants, who holds which relationships and know-how | Revenue or the product roadmap that depends on one person with a short notice period |
| 7 | Data and UK GDPR basis | Records of processing, the lawful basis for each customer and marketing dataset, privacy notices, processor contracts, ICO fee, breach log | Marketing lists with no lawful basis, or personal data that cannot lawfully pass to the buyer |
| 8 | Brand and domain control | Domain registrant records and registrar accounts, social handles, brand guidelines, any disputes | Domain or registrar account held by a founder, agency or former employee |
| 9 | Capitalised development costs | Capitalisation policy, project cost schedules, timesheets, impairment reviews, the link to R&D tax relief claims | Capitalised spend that rose ahead of the sale, or costs with no project-level support |
| 10 | Valuation evidence | Any prior valuation, PPA or impairment test; management's view of which assets drive revenue; royalty, churn and margin data | No evidence for the value the seller attributes to a named asset |
Every row in the checklist answers one of four questions: does the asset exist, does the target own it, will it transfer, and what is it worth. A finding that cannot be tied to one of those questions is noise; a finding that answers one of them should change the price, the structure or the sale and purchase agreement.
This guide takes the buyer's side. It is written for private equity deal teams, search fund principals and corporate acquirers running the intangible workstream on a UK mid-market acquisition, usually between a signed letter of intent and exchange. It sits alongside financial, legal and commercial diligence; it does not replace a legal opinion on title or a financial quality of earnings review, and it is not a substitute for either.
Most of what a buyer pays for in a services, software or brand-led business is intangible, and the seller's accounts show little of it: UK GAAP and IFRS both keep internally generated brands, customer lists and most know-how off the balance sheet. The diligence file is therefore the only place the buyer sees those assets before it owns them. Sellers preparing for these questions should read our guides to vendor due diligence, the IP audit and building a data room for selling a business, which cover the same ground from the other side of the table.
IP due diligence starts with a simple question that is often hard to answer: does the company that is being sold own the intellectual property the business uses? Chain of title is the unbroken documentary link from each person who created an asset to the company that claims it. In the UK, ownership depends on who created the work and under what arrangement.
Work a founder created before the company existed belongs to the founder. It reaches the company only by a written assignment, which is often missing in businesses that started as side projects.
An invention made in the course of an employee's normal or specifically assigned duties, where an invention might reasonably be expected to result, belongs to the employer (Patents Act 1977, s.39), and so does copyright in work made in the course of employment, unless agreed otherwise (Copyright, Designs and Patents Act 1988, s.11(2)). Check that the person was an employee at the time, and that the work fell within their duties.
There is no UK equivalent of the US "work made for hire" rule for contractors. Copyright in code, designs or content a freelancer or agency produces stays with them unless they assign it, and an assignment of copyright must be in writing and signed (CDPA 1988, s.90(3)).
Sponsored research and joint development usually come with a licence or a shared-ownership clause. Read the terms for exclusivity, field of use and what happens on a change of control.
A missing contractor assignment is the most common chain-of-title gap in software and design businesses. If the core product was built partly by freelancers or an outsourced development house without signed assignments, the buyer may not own what it is paying for. The usual remedy is a confirmatory assignment signed before completion, made a condition of the deal.
Registered rights can be verified against public registers rather than taken from the seller's schedule. Search each register yourself and reconcile it to the disclosure.
| Register | What it confirms | What to check |
|---|---|---|
| UKIPO (patents, trade marks, designs) | UK registered rights and their recorded owner | Owner is the target entity; status is live; trade mark classes cover what the business sells; renewal dates (UK marks renew every 10 years; patent renewal fees fall due each year from the fourth anniversary of filing) |
| EUIPO (EU trade marks and designs) | Rights across the EU | Since 1 January 2021 an EU trade mark no longer covers the UK; confirm the matching UK mark exists |
| USPTO (US patents and trade marks) | US registered rights | Maintenance fees on patents; declarations of use and renewals on marks |
| Companies House charges register | Security granted over the company's assets, including IP | Debentures or fixed charges over IP; whether charges shown as outstanding have been satisfied |
| Companies House PSC register | Who has significant control of each group company | Related companies under common control, outside the perimeter being sold, where key IP may sit |
Two gaps recur. The first is an assignment that was signed but never recorded at UKIPO: recording matters, because an unrecorded transfer can leave the owner exposed to a third party who acquires a conflicting interest and can limit what it recovers in an infringement claim. The second is security: a lender's charge over IP must be released at completion, or the buyer acquires an encumbered asset.
Unregistered rights still matter. Copyright, unregistered design right, know-how and an unregistered brand protected by the law of passing off carry no certificate, so the evidence is the chain of title, the history of use and the absence of disputes.
The rights a target uses but does not own can matter as much as the rights it owns. A licence in (software, data feeds, a patented process) may be what the product runs on; a licence out may have given away exclusivity in a territory the buyer wants to grow in.
| Clause | Why it matters to the buyer | Share deal vs asset deal (UK) |
|---|---|---|
| Change of control | Lets the counterparty terminate or renegotiate when ownership changes | Triggers in a share deal, because the contracting company stays the same but its owner changes |
| Assignment restriction | Prevents the contract moving to a new entity without consent | Bites in an asset deal, where every contract must be assigned or novated |
| Exclusivity and field of use | Defines what the target can do with licensed rights, and what it has granted away | Travels with the contract in either structure |
| Termination for convenience | Lets a licensor or customer leave on notice regardless of performance | Unchanged by structure; price the notice period |
Open-source software deserves its own line in IP due diligence. Almost every modern codebase uses it, and most licences are permissive (MIT, BSD, Apache 2.0), asking only for notices to be kept. Copyleft licences are different: the GPL requires the source code of software containing GPL code to be made available on GPL terms when that software is distributed, and the AGPL extends the obligation to modified versions that users interact with over a network, which brings SaaS products into scope.
A buyer's scan of a target's mobile app finds a GPL-licensed library compiled into the version distributed through the app stores. The finding goes three ways: a pre-completion remediation plan to replace the library, a specific indemnity in the sale and purchase agreement for any claim before remediation, and an engineering owner in the 100-day plan. The same library on an internal server, never distributed, would have been a much smaller finding.
The remaining operational areas share a pattern: the asset is real, but its value depends on something that may not survive a change of owner.
Customer relationships are often the largest identified intangible in an acquisition. Request revenue by customer for at least three years and cohort retention by year of acquisition, then read the top contracts for term, renewal, termination and change-of-control terms. Concentration above about 10% of revenue in one customer deserves a specific answer on what happens if that customer leaves.
Key person risk is the share of value that leaves with an individual. Map who holds the largest customer relationships, the product knowledge and the supplier terms, then compare that map with service agreements, notice periods and restrictive covenants. In a UK asset purchase of the business as a going concern, employees assigned to it transfer to the buyer under TUPE; in a share purchase their contracts are unchanged. Neither keeps a founder who has decided to leave.
Customer and marketing data is only an asset if it can be used lawfully after completion. Ask for the records of processing, the lawful basis relied on for each dataset under UK GDPR, the privacy notices in force when the data was collected, consent or soft opt-in records for electronic marketing under the Privacy and Electronic Communications Regulations (PECR), processor contracts, international transfer arrangements, the ICO registration and the breach log. In an asset deal the database moves to a new controller, so check that the privacy notices allow it.
Confirm that the company, not a founder, an agency or a former employee, is the registrant of every trading domain and controls the registrar account, the DNS and the social media handles. Losing a domain after completion can take a business offline in an afternoon. For the brand itself, pair the registration search above with evidence of use and any disputes.
For customers, people, data and brand, the question is less "does it exist" than "will it still be here, and still usable, on the first day after completion". Each answer should point to a consent, a retention arrangement, a remediation step or a price adjustment.
Capitalised development costs are the one intangible that usually is on the seller's balance sheet, and they deserve scrutiny for that reason. Under IAS 38 (paragraph 57), development costs must be capitalised once six criteria are met. Under FRS 102 Section 18 (paragraph 18.8H), capitalising development costs that meet the criteria is a policy choice. Either way, capitalisation moves spend out of operating costs, which raises EBITDA.
| Request | What it tests |
|---|---|
| The capitalisation policy and when it was adopted or changed | Whether a policy change flatters the years the buyer is pricing on |
| Project-level cost schedules, timesheets and payroll allocations | Whether each capitalised pound is supported and relates to development, not maintenance |
| Evidence of technical feasibility and intention to complete for each project | Whether the recognition criteria were met when costs were first capitalised |
| Impairment reviews and abandoned projects | Whether the carrying amount still reflects a working asset |
| Projects included in R&D tax relief claims | Whether the technical narrative is consistent across the accounts and HMRC claims |
A target capitalises £600,000 a year of developer time that it previously expensed. Its EBITDA rises by £600,000. At an illustrative multiple of 8x EBITDA, that is £4.8M of headline price for a change in accounting policy, not in the business. The buyer's normalisation should show EBITDA on both bases before the multiple is applied.
Diligence-stage valuation is not the formal purchase price allocation; it is a range for each material asset, good enough to test whether the price is justified and to prepare the PPA team. Our guide to intangible asset valuation methods covers each method in depth.
| Asset | Usual method | Key inputs to request |
|---|---|---|
| Brand and trade marks | Relief from royalty | Revenue under the brand, comparable royalty rates, remaining useful life |
| Customer relationships | Multi-period excess earnings (MPEEM) | Revenue by customer, churn by cohort, margins, contributory asset charges |
| Technology and patents | Relief from royalty or MPEEM | Revenue dependent on the technology, royalty evidence, remaining patent life |
| Software built in-house | Cost approach | Development hours, loaded rates, obsolescence |
| Non-compete agreements | With-and-without | Revenue at risk without the covenant, probability of competition |
| Assembled workforce | Not recognised separately under IFRS 3 | Recruitment and training cost, used as a contributory charge only |
Add the identified intangibles to the fair value of the other identifiable assets, less the liabilities assumed (including any deferred tax on the intangibles), and compare the total with the consideration. The residual is goodwill. A large residual is not wrong in itself, since it can reflect the expected benefits of combining the businesses, an assembled workforce and market position, but it should be explained. An unexplained residual usually means assets have not been identified, or the price is high.
Converting each finding into a number in the model, a clause in the agreement or an owner after completion is a discipline of its own; our companion article on moving from diligence findings to deal terms works through it finding by finding.
The intangible workstream should run in parallel with financial and legal diligence, not after them, because its findings change the price and the drafting.
| Stage | Timing | Intangible workstream activity |
|---|---|---|
| Preliminary assessment | Before the letter of intent | Desktop review: registers, website, product, public filings and charges |
| Detailed diligence | After the letter of intent, before the SPA | The ten-area checklist, the valuation range and the risk scoring |
| SPA negotiation | As diligence completes | Specific indemnities, warranties and indemnities, conditions, retention and earn-out terms |
| Between exchange and completion | Before completion | Confirmatory assignments, customer consents, charge releases, domain transfers |
| After completion | Day one onwards | PPA within the measurement period; the 100-day plan for each open finding |
A complete exercise produces four deliverables: a register of every material intangible with ownership, transferability and evidence noted against each; a preliminary valuation range per asset with the method documented; a scored risk matrix with a proposed response to each finding; and a PPA readiness note, so the post-completion allocation reuses the diligence work rather than repeating it. After completion, that register becomes the acquirer's record for the intangible assets lifecycle: protection, amortisation, renewal and eventual disposal.
The checklist applies everywhere; the weight on each area does not.
| Sector | Areas that usually carry the value | Specific checks |
|---|---|---|
| Software and SaaS | Software, customer relationships, data | Open-source scan, contractor assignments, cohort churn, third-party API dependencies |
| Professional services | Customer relationships, key people | Who holds each client, notice periods and covenants, partner retention |
| Life sciences | Patents, regulatory approvals, data | Remaining patent life, freedom to operate, approval transferability, clinical data rights |
| Consumer brands | Trade marks, brand, domains | Mark coverage in each sales territory, domain and channel control, licensing and disputes |
| Financial services | Regulatory permissions, customer relationships | FCA permissions and change-in-control approval, book retention, outsourcing contracts |
In regulated sectors the change of ownership itself may need approval. A buyer acquiring control of an FCA-authorised firm needs the FCA's approval before completion (the PRA's, for a dual-regulated firm such as a bank or insurer), which belongs in the deal timetable from the start.
Opagio Intangibles supports the intangible workstream; it does not perform legal due diligence. Title opinions, contract review and data-protection advice stay with the buyer's lawyers.
What it does is give the workstream a structure. It identifies and classifies a target's intangible assets across Opagio 12, values the material ones with the Asset Valuator's recognised methods (relief from royalty, MPEEM, with-and-without, cost approach and others), and records each one in the Opagio Value Drivers Register, the evidence base the post-completion purchase price allocation can reuse. The Normalised P&L restates the target's earnings through documented adjustments on a stated basis, which is where the capitalised development question can be tested.
See how investors use Opagio on acquisitions at Opagio for investors, or work through the intangible asset diligence checklist lesson in the PE Due Diligence programme. For the operator's full buy-side journey, start at how to buy a business.
It is the part of acquisition due diligence that examines the target's non-physical assets: intellectual property, customer relationships, brand, data, software and the people who hold the know-how. It tests whether each asset exists, is owned by the target, will survive the change of ownership and is worth what the price assumes.
At minimum: IP ownership and chain of title; registrations and renewals at UKIPO, EUIPO and USPTO; licences in and out with change-of-control terms; open-source exposure; customer contracts, concentration and churn; key-person dependency; data and the UK GDPR basis; brand and domain control; capitalised development costs; and valuation evidence. The table at the top of this guide sets out what to request for each.
IP due diligence is the intellectual property strand of intangible asset due diligence. It confirms that the target owns, or is properly licensed to use, the patents, trade marks, designs, copyright and know-how its business depends on, that registrations are valid and in the right name, and that nothing in a licence or charge stops the rights passing to the buyer.
Before the letter of intent, with a desktop review of the public registers, and in full straight after it. Findings that arrive after the price is agreed tend to become warranty claims rather than price adjustments, and the 12-month measurement period for the purchase price allocation is too late to discover them.
Usually a combination: lawyers for title, contracts and data protection; accountants for capitalised costs and the quality of earnings; valuers for the asset-level ranges; and technical specialists for code scans. The buyer's deal team owns the synthesis, which is where a single register of the assets, their evidence and their risks earns its keep.
| Read next | Why |
|---|---|
| From diligence findings to deal terms | How each finding becomes a price adjustment, a clause or a post-completion owner |
| Acquisition due diligence checklist | The full set of workstreams around this one |
| How to buy a business | The operator's buy-side hub, from strategy to integration |
| The intangible assets you are really buying | The buyer's view of what transfers |
| Purchase price allocation: the complete PPA guide | What happens to the findings after completion |
| FAQ: How do investors evaluate intangible assets during due diligence? | The investor's questions in brief |
| FAQ: What is acquisition due diligence? | The diligence process from the top |
| Glossary: due diligence, open source licence, IFRS 3 business combinations, Value Drivers Register | Definitions of the terms used above |
Tony Hillier is Chairman of Opagio with 30 years of experience in structured finance, M&A advisory, and asset valuation. He has led due diligence on over 200 transactions across financial services, technology, and professional services sectors. Meet the team.
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