Technology and IT businesses in Castellón: buying, selling and valuation

The key word is recurrence. A company that charges software subscriptions, maintenance contracts or managed support with automatic renewal offers income the buyer can project; one that lives on bespoke projects depends on closing the next order. Presenting income separated by type, with the trend in customer additions and cancellations, is what helps most to defend the value.

The code and the rights to it are the central asset in a software company. The buyer will check that the intellectual property belongs to the company and not to programmers or external contractors, which open-source components are used and under which licences, how it is documented and whether there is significant technical debt. Contracts with customers must make clear who owns the developments.

The team is the other pillar. If knowledge of the product or of customers' systems rests with one or two people, the risk is high; contracts with reasonable clauses, incentives for the team to stay after the sale and technical documentation reduce it. Information security, data protection compliance and dependence on an infrastructure provider or a large customer are also reviewed.

In consultancies and IT services companies for SMEs, the value usually lies in support contracts with local customers and in the certifications from the vendors they work with. A buyer will look at how many of those customers have a written contract, which service levels have been committed to and whether the margin holds up when all the team's hours are counted.