The Intangible Asset Diligence Checklist
PE Due Diligence Programme — Lesson 2 of 10
In Lesson 1, we established why intangible asset diligence matters — and why the standard PE playbook fails to capture 70-90% of what you are actually paying for. This lesson provides the remedy: a structured, category-by-category checklist that ensures your diligence process covers every material intangible asset in the target business.
The framework is built on the Corrado-Hulten-Sichel (CHS) taxonomy — the most comprehensive economic classification of intangible assets, spanning seven categories from computerised information to organisational capital. For each category, I have included the key assessment questions, the data sources you should request, and the red flags that should trigger deeper investigation.
A structured intangible diligence checklist is not a luxury — it is the minimum standard for responsible deal-making. This checklist should be deployed alongside traditional financial, commercial, and legal diligence from day one of the process, not bolted on as an afterthought. Print it, customise it for each deal, and hold your diligence teams accountable for completing it.
The Seven-Category Framework
The CHS framework classifies intangible investment into seven categories. Each maps to identifiable value drivers in a PE target.
Category 1: Computerised Information
This category covers software, databases, and digital content assets — the digital infrastructure that underpins the target's operations and competitive position.
Computerised Information Diligence Questions
| Area | Key Questions | Data Sources |
|---|---|---|
| Proprietary software | What software has the company built in-house? Is the code well-documented? Who owns the IP? | Source code repository access, IP assignment agreements, development team interviews |
| Databases and data assets | What proprietary data does the company hold? How is it collected, stored, and protected? What is its competitive value? | Data architecture documentation, privacy compliance records, data licensing agreements |
| Digital content | Does the company own valuable digital content (training materials, content libraries, design assets)? | Content inventory, licensing terms, usage analytics |
| Third-party dependencies | What critical software is licensed from third parties? What happens if a licence is terminated? | Software licence inventory, vendor contracts, renewal terms |
Red Flags
- No formal IP assignment agreements from developers or contractors
- Critical business logic in spreadsheets rather than production systems
- Single vendor dependency for core operational software
- Data collected without proper consent or GDPR compliance
- Source code stored only on individual machines, not in version control
In software-intensive businesses, the absence of formal IP assignment agreements is one of the most dangerous findings in diligence. If developers or contractors built core technology without assigning IP to the company, the company may not legally own its most valuable asset. This must be verified early in the diligence process — it can be a deal-breaker.
Category 2: Innovative Property
This covers formal intellectual property: patents, trademarks, trade secrets, designs, and R&D output. Lesson 3 covers IP assessment in depth; here we provide the checklist overview.
Innovative Property Diligence Questions
| Area | Key Questions | Data Sources |
|---|---|---|
| Patents | What patents are held? In which jurisdictions? When do they expire? Are there pending applications? | Patent register, patent attorney correspondence, freedom-to-operate opinions |
| Trademarks | What trademarks are registered? Are they actively maintained? Any disputes? | Trademark register, renewal records, opposition proceedings |
| Trade secrets | What proprietary know-how exists? How is it protected? Who has access? | Confidentiality agreements, access controls, employee NDAs |
| R&D pipeline | What is in the development pipeline? What is the expected time-to-market and commercial value? | R&D roadmap, budget allocations, project status reports |
| Licensing income | Does the company earn licensing revenue from its IP? What are the terms? | Licence agreements, royalty income records, licensee compliance |
Red Flags
- Patents approaching expiry with no replacement pipeline
- Trademarks registered in limited jurisdictions while the business operates globally
- Trade secrets known to departed employees with no non-compete protections
- R&D spending declining as a percentage of revenue
- Pending IP disputes or infringement claims not disclosed
Category 3: Brand and Market Position
Brand assets include registered marks, reputation, market position, and customer perception. These are often assumed rather than measured in PE diligence.
Brand Diligence Questions
| Area | Key Questions | Data Sources |
|---|---|---|
| Brand recognition | What is the brand's awareness level in target markets? How does it compare to competitors? | Brand tracking surveys, search volume data, social listening |
| Pricing power | Does the brand enable premium pricing? What is the price differential vs. unbranded alternatives? | Pricing analysis, win/loss data, customer research |
| Brand protection | Are brand assets legally protected? Any trademark disputes or cybersquatting? | Trademark portfolio, domain name inventory, brand enforcement records |
| Reputation risk | Are there reputational liabilities (past scandals, negative reviews, regulatory actions)? | Media monitoring, Glassdoor/Trustpilot reviews, regulatory correspondence |
A PE fund evaluating a mid-market consumer brand discovered during intangible diligence that the company's brand recognition was 4x higher than competitors in its core market — but the brand was protected by trademark registrations in only two of the seven countries where it operated. A competitor had already filed similar marks in three of the unprotected markets. The fund adjusted its offer price downward by 8% to reflect the cost of trademark enforcement and the risk of lost exclusivity.
Category 4: Human Capital
People are the most volatile intangible asset. They cannot be owned, they can leave, and their knowledge often walks out with them. Lesson 4 covers talent assessment in detail.
Human Capital Diligence Questions
| Area | Key Questions | Data Sources |
|---|---|---|
| Key person dependency | Who are the critical individuals? What happens if they leave? | Org chart analysis, responsibility mapping, succession planning documents |
| Retention mechanisms | What equity, deferred compensation, or contractual mechanisms retain key people? | Employment contracts, option schemes, retention bonus plans |
| Knowledge concentration | Is critical knowledge documented or trapped in individuals' heads? | Process documentation, knowledge base review, cross-training records |
| Team stability | What is the voluntary turnover rate? How does it compare to industry benchmarks? | HR records, exit interview summaries, tenure analysis |
| Cultural health | Is the culture strong enough to survive a change of ownership? | Employee engagement surveys, Glassdoor reviews, management interviews |
Red Flags
- Founder/CEO with no employment contract or non-compete
- More than 30% of revenue dependent on relationships held by one individual
- Voluntary turnover above industry benchmark
- No documented succession plan for any C-suite role
- Key technical knowledge held by a single person with no documentation
Category 5: Customer Capital
Customer relationships are typically the most valuable identifiable intangible asset class. Lesson 5 provides the full assessment framework.
Customer Capital Diligence Questions
| Area | Key Questions | Data Sources |
|---|---|---|
| Revenue concentration | What percentage of revenue comes from the top 5, 10, and 20 customers? | Revenue by customer report, aged analysis |
| Contract quality | What are the average contract lengths, renewal rates, and termination provisions? | Sample contract review, renewal data, churn analysis |
| Customer lifetime value | What is the CLV by customer segment? How does it compare to acquisition cost? | Cohort analysis, CAC data, retention metrics |
| Switching costs | How deeply integrated is the product into customers' workflows? What would it cost them to switch? | Product usage data, integration complexity, customer interviews |
| Pipeline quality | What does the sales pipeline look like? How reliable are forward revenue projections? | CRM data, pipeline conversion rates, sales team interviews |
Category 6: Organisational Capital
This encompasses the systems, processes, and institutional knowledge that enable the business to operate independently of any individual.
Organisational Capital Diligence Questions
| Area | Key Questions | Data Sources |
|---|---|---|
| Process maturity | Are key business processes documented, repeatable, and scalable? | Process documentation, quality management records, operational audits |
| Management systems | What governance, reporting, and decision-making structures exist? | Board packs, management reporting, governance framework documents |
| Supply chain | How resilient is the supply chain? Are there single-source dependencies? | Supplier analysis, concentration data, contingency plans |
| Operational leverage | Can the business scale without proportional headcount growth? | Revenue-per-employee trends, automation assessment, scalability analysis |
Red Flags
- No documented standard operating procedures for core business processes
- Management information produced manually in spreadsheets
- Single-source supplier for critical inputs
- Revenue growth has required proportional headcount growth (no operating leverage)
Category 7: Regulatory and Compliance Capital
Licences, accreditations, certifications, and compliance assets can be material — and their absence can be catastrophic. Lesson 8 covers regulatory liabilities.
Regulatory Capital Diligence Questions
| Area | Key Questions | Data Sources |
|---|---|---|
| Licences and permits | What licences are required to operate? Are they all current? Are they transferable on change of control? | Licence inventory, renewal records, regulatory correspondence |
| Certifications | What industry certifications does the company hold (ISO, SOC 2, CE marking)? | Certificate copies, audit reports, expiry dates |
| Compliance status | Are there any open regulatory investigations, enforcement actions, or compliance gaps? | Regulatory correspondence, compliance audit reports, legal review |
| Data protection | Is the company GDPR/DPA compliant? Are data processing agreements in place? | Privacy impact assessments, data processing records, DPA inventory |
In regulated industries (financial services, healthcare, defence, education), licences and accreditations can represent a significant portion of enterprise value. A licence that takes years to obtain and cannot be easily replicated creates a genuine competitive moat. But licences that include change-of-control provisions can also create transaction risk — the licence may need to be re-applied for or re-approved post-deal.
Using the Checklist in Practice
Implementation Guidance
This checklist is designed to be deployed at the start of the diligence process, not bolted on at the end. Assign each category to the most relevant diligence workstream — IP and brand to legal, human capital to commercial/HR, customer capital to financial/commercial, technology to technical. Require each workstream to report findings against the checklist at every diligence update meeting. The Opagio Valuator provides a structured digital framework for scoring and tracking intangible asset assessments across all seven categories.
Week 1: Deploy the checklist
Distribute the checklist to all diligence workstreams at kick-off. Brief teams on what to look for in each category. Include intangible asset questions in the initial data request list.
Weeks 2-4: Gather and assess
Each workstream completes its assigned sections. Red flags are escalated immediately. Cross-references between categories are identified (e.g., key person risk linked to customer concentration).
Week 5: Synthesise findings
Consolidate all intangible asset findings into a single report. Score each category (green/amber/red). Quantify the financial impact of identified risks. Feed findings into the deal model and negotiation strategy.
What Comes Next
In Lesson 3: Assessing Intellectual Property, we take a deep dive into the first major asset category — patents, trademarks, trade secrets, and licensing income. IP is often the most legally complex intangible asset class, and getting the assessment wrong can expose the fund to material post-deal risk.
Mark Hillier is Co-Founder and CCO of Opagio. He brings more than 30 years' experience helping businesses scale, prepare for PE investment, and execute successful exits. He has sat across the table from PE buyers and knows what they need to see — and what they routinely miss. Meet the team.