Operating permits and licences — government-granted authorisations to conduct specific business activities — are among the most straightforward contract-based intangible assets to identify under IFRS 3. They are contractual rights par excellence: a government or regulatory body grants explicit permission to operate, and without that permission, the business cannot function.
The range of operating permits is vast: banking licences, insurance authorisations, telecommunications licences, pharmaceutical manufacturing permits, gaming licences, alcohol licences, environmental permits, aviation operating certificates, and many more. Their common characteristic is that they create a regulatory barrier to entry — a form of scarcity that translates directly into economic value.
Not all operating permits create significant intangible value. A basic business registration or a standard health and safety certificate, while legally required, is readily obtainable and has negligible economic value above its administrative cost. Permits create material intangible value when they are:
| Characteristic | Value Implication |
|---|---|
| Scarce or limited in number | Barrier to entry; supply constraint creates premium |
| Time-consuming to obtain | Cost of delay provides economic advantage to incumbents |
| Non-transferable (or restricted transfer) | Reduces separability but may increase strategic value |
| Revenue-enabling | Without the permit, the specific revenue stream cannot exist |
| Geographically specific | Location-based permits in desirable areas have premium value |
The value of a permit is inversely proportional to its availability. A gaming licence in a jurisdiction that limits the number of operators is worth far more than a general business licence that any applicant can obtain. The regulatory scarcity creates the economic value.
Banking licences, insurance authorisations, payment institution licences, and investment firm permissions are among the most valuable regulatory intangible assets. The regulatory barriers (capital requirements, fitness and propriety tests, compliance infrastructure) create significant entry costs — and the licence itself represents the culmination of that investment.
In jurisdictions that limit the number of gaming operators (Nevada, Macau, many European markets), gaming licences can represent hundreds of millions in intangible value. The licence grants the right to operate in a market with controlled supply and strong demand.
Spectrum licences and telecommunications operating permissions have been valued at billions in government auctions, representing the right to operate in a regulated market with limited competition.
Emissions permits (carbon credits, pollution allowances), waste management licences, and environmental operating certificates can represent significant value, particularly as environmental regulation tightens and the supply of permits decreases.
A waste management company is acquired with a portfolio of environmental operating permits covering 12 sites. Each permit took 18-36 months to obtain through regulatory application, environmental impact assessment, and public consultation. The cost to replicate the permit portfolio — including application costs, consultant fees, and the opportunity cost of the 2-year average delay — is approximately £4.5 million. This replacement cost forms the floor value for the permit intangible assets.
The cost approach estimates the value based on the cost to obtain an equivalent permit today. This includes:
What would it take for a market participant to obtain an equivalent permit today? Map the regulatory requirements, application process, and typical timeline.
Include direct costs (fees, lawyers, consultants), indirect costs (management time, infrastructure), and opportunity costs (revenue foregone during the application period).
Not all applications succeed. If only 60% of applications are approved, the expected cost to obtain the permit is the direct cost divided by the success probability.
Where the permit is the primary enabler of a specific revenue stream, the income approach estimates the economic benefit generated by holding the permit. This is particularly relevant for:
Permits granted at the regulator's discretion — where renewal is not guaranteed and depends on continued compliance — carry significant regulatory risk. A pharmaceutical manufacturing licence, for instance, can be suspended if the facility fails an inspection. Valuation must account for this regulatory risk through appropriate discount rates or probability adjustments.
Permit useful lives depend on the regulatory framework:
Regulatory frameworks evolve, sometimes abruptly. The introduction of open banking regulation, the legalisation of cannabis, the deregulation of energy markets — each created or destroyed permit value overnight. Valuations should consider the stability of the regulatory environment and the risk of disruptive changes that could either enhance or eliminate the permit's scarcity value.
Operating permits and licences are one of eight contract-based intangible assets under IFRS 3. For the complete taxonomy, see 35 types of intangible assets. For financial services regulatory assets, read our fintech intangible collateral guide.
Tony Hillier is an Advisor at Opagio with over 30 years of experience in structured finance, M&A advisory, and intangible asset valuation. Meet the team.
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