Valuing intangible assets in bankruptcy, including data

Intangible assets are often the most undervalued items on a debtor's schedules. Trademarks and domain names get attention; the company's operational records rarely do. Yet those records now have a market. This guide explains how to think about their value in a bankruptcy case.

General information, not legal, valuation or tax advice.

Why valuation matters in a case

Value comes up in several places:

• Schedules. Debtors list assets, including intangibles, on Schedule A/B. Data is often listed at "unknown" or omitted.
• Sale approval. Under § 363(b), the court wants a fair and reasonable price.
• Lien disputes. Secured creditors care how much value their collateral, including general intangibles, represents.
• Plan confirmation. Liquidation analyses compare plan recoveries with what creditors would get in Chapter 7.

The three standard approaches

Appraisers value intangibles using three families of methods:

1. Market approach: what similar assets have sold for. For company data, public comparables are scarce because most licenses are confidential.
2. Income approach: the present value of future income the asset will generate. Useful for royalty streams; harder for a one-time license.
3. Cost approach: what it would cost to recreate the asset. Operational history generally can't be recreated at any price, so cost-based numbers mislead.

For data, the most reliable evidence of value is usually a real market test: multiple qualified buyers making offers on the same described dataset. That's also what courts find most persuasive.

What drives the price of operational data

AI developers pay for the record of how work gets done. Price tends to rise with:

• Breadth of systems. Chat, email, documents and the CRM or ERP together show the full picture of a workflow.
• Years of history. Longer histories show how processes change after things go wrong.
• Specialization. Uncommon, skilled work (regulated trades, complex logistics, specialized professional services) is scarcer than generic office work.
• Consistency. Clean, continuous records are worth more than scattered fragments.
• Exportability. Data that can be exported in full, with its structure intact, is worth more.

Price tends to fall with:

• Exclusions. Every carve-out for privacy, contracts or privilege reduces what's delivered.
• Restrictions. Narrow permitted uses or short terms reduce value.
• Timing. Demand moves. A dataset that was in demand last quarter may not be next quarter.

Illustrative ranges, and why they're only that

Our illustrative range is up to $50K to $1M+ for US companies with meaningful operating history. That range is wide because the drivers above are. We don't promise a price, and nobody should: the real number comes from bids, and in a bankruptcy case it must also survive the court's review.

Valuation for the schedules versus the sale

The figure on the schedules and the sale price serve different purposes. A debtor shouldn't inflate the schedules based on hopes, and shouldn't omit an asset because it seemed worthless. If you're unsure, counsel can list the asset with an explanation, and amend once a market test shows value.

Lenders and the "collateral value" question

If a lender has a lien on general intangibles, it will care how a data sale affects its position:

• A license that leaves the data with the estate may preserve, or even enhance, the value of the collateral while generating proceeds.
• An exclusive deal or outright sale may reduce what remains for a later buyer of the business.

These are negotiations, not formulas. Bringing the lender in early, with the valuation and the proposed structure, helps.

Chapter 7 and the liquidation analysis

In a Chapter 11 plan, the "best interests" test (§ 1129(a)(7)) requires that each impaired creditor who rejects the plan receive at least what it would get in Chapter 7. If data has real value, it belongs in the liquidation analysis. In an actual Chapter 7, the trustee decides whether to sell it or abandon it as burdensome or of inconsequential value under § 554. See the Chapter 7 trustee guide to data assets.

Practical steps

1. Inventory the systems, approximate volumes and years of history.
2. Screen for privacy, contractual and privilege limits.
3. Get an illustrative range to decide whether a process is worth running.
4. Run a market test with multiple buyers if it is.
5. Document the process for the court.

Common mistakes

• Treating data as worthless because it isn't on the balance sheet.
• Relying on a cost-to-recreate number that no buyer would pay.
• Letting systems lapse, which destroys value, before deciding.
• Negotiating with a single buyer and asking the court to bless the price.

A short, confidential valuation at the start avoids all four.

A worked valuation memo

Here is the outline of a short memo supporting the price of a data license, the kind that can be attached to a sale motion or shared with a lender.

1. Scope. Systems and record types, date ranges, approximate volumes (for example, 410,000 tickets, 1.2 million emails, 38,000 documents), and exclusions.
2. Quality factors. Continuity of systems, share of free text versus structured data, depth of threads, and how cleanly the data de-identifies.
3. Market evidence. Indications of interest and bids received, with buyer types described generally, plus comparable transactions where available.
4. Method. A market approach anchored on the bids, cross-checked against an income view of what the license enables the buyer to build.
5. Conclusion. A range, and why the selected bid falls within it.
6. Limits. What would change the value, such as a contract restriction, a privacy finding or data loss.

Two pages is usually enough. The marketing record does most of the persuading; the memo puts it in context.

How liquidation value differs

In Chapter 7 or in the liquidation analysis for a plan (§ 1129(a)(7)), the question is what the asset would bring in a liquidation. For data, the answer is often similar to the going-concern license value, because the asset is historical and buyers don't need the business to keep running. That can be a surprise to lenders and committees who assume intangibles are worth little in a liquidation. Point to the bids. See the Chapter 7 trustee guide and data assets in a plan of reorganization.

To translate a value into practical terms, try the runway calculator, or request a confidential valuation.

Who should do the valuation

For most data deals a formal appraisal isn't needed; the market test is the valuation. Where the amount is large or contested, a financial adviser can provide a short independent opinion.

Frequently asked questions

How is company data valued in bankruptcy?

Mostly by testing the market: obtaining bids from several buyers and documenting the process. Income and cost approaches can support the range but rarely drive it.

Should the data be on the schedules?

Counsel should consider listing it, often as general intangibles or records, at an unknown or estimated value. Under-describing it can cause questions later.

Does the size of the company determine value?

Less than people expect. History, continuity and quality of records matter more than headcount alone.

Can a valuation be challenged?

Yes. A creditor can argue the price is too low. Multiple bids and a documented process are the strongest answers.

This guide is general information, not legal, tax or financial advice, and reading it does not create an attorney-client relationship. Bankruptcy outcomes depend on the facts, the court and the parties; nothing here promises price, timing or court approval. Talk to your bankruptcy counsel about your case.