How data assets are valued in distressed M&A, and why records often price at zero

Why records rarely get a line in a distressed purchase price

In most distressed sales, operational records are valued at close to nothing. The buyer is pricing what it can underwrite in days: customer contracts, receivables, inventory, equipment and the code it plans to run. Years of support tickets, project files and internal documents usually move under the books-and-records clause of the asset purchase agreement, transferred or excluded without separate consideration.

That is a rational buyer's position, not an oversight. Diligence windows are compressed, bid procedures reward certainty, and an acquirer has no reason to pay for an asset whose value depends on a market it does not take part in. The result is a category of value that nobody prices, and seller-side advisers rarely have the time or the comparables to argue otherwise.

How the three valuation approaches handle data

Valuation work usually starts from the cost, market and income approaches. Each one runs into trouble when the asset is a company's operating history and the timeline is a distressed sale.

The market approach is where people most often reach for a headline number, and where it is easiest to misuse one. Reddit's IPO registration statement disclosed data licensing arrangements, entered in January 2024, with an aggregate contract value of $203.0 million and terms of two to three years. That is a multi-year total for a consumer platform's user-generated content, not annual revenue, and the filing does not name the licensees. It says nothing direct about what a mid-sized company's ticket history or project archive is worth. Use disclosures like it as evidence that a market exists, not as a comparable. For the general principles, see how is a company's data valued.

How a separate license surfaces value without the acquirer underwriting it

The practical answer is to stop asking the acquirer to price the records. Run a second track instead: an exclusive license of the records for AI training, negotiated with the buyers who actually want them.

1. Separate the asset. Copyright law lets an owner transfer exclusive rights separately and keep the rest, as 17 U.S.C. 201 provides, so a company can license specific uses of content it owns while selling or retaining everything else. Counsel decides how that applies to the particular records.
2. Qualify the records. SourceX checks the company against its qualification baseline: 50+ full-time employees at peak (contractors excluded), several years of documented operations, the right to license the data, and an authorized sponsor, which in a distressed case may be a fiduciary.
3. Inventory before anything moves. The company lists its systems, the years each one covers and what can be exported. Nothing is delivered until an agreement is executed and the company authorizes it.
4. Set the price with the seller, then test it. SourceX agrees one all-in price and the terms with the company before AI labs and data buyers review the opportunity. Once a company is deal-ready, buyers typically respond within about two weeks.
5. Close and collect. When a buyer selects the data and the agreement is signed, the company receives a one-time payment, typically within about 60 days of invoicing.

The acquirer's model does not change. It buys what it was going to buy, and the license is disclosed to it as part of the transaction.

Questions for the deal team before running two tracks

• How does the asset purchase agreement define books and records, and does the buyer take originals, copies or nothing?
• Will the license be signed before the sale closes, and will the buyer take the assets subject to it?
• Does an exclusive AI-training term conflict with anything the buyer plans to do with the same records?
• Who receives the license proceeds, and in what order? See who gets the money from a data license in a bankruptcy or ABC.
• Do creditors or the court need to approve the license? See do creditors have to approve a data licensing deal.
• Do customer contracts or the privacy policy restrict any of the records?
• Who will run exports after closing if the IT team moves to the buyer?
• How will the seller account for the license? Under ASC 606, whether a license gives a right to use or a right to access intellectual property affects when revenue is recognized, as Deloitte's revenue recognition roadmap explains. The seller's auditors decide how it applies.

What this means for distressed investors

Special situations funds, distressed lenders and opportunistic buyers often see a process from the inside before the seller's advisers have mapped every asset. That puts them in a position to suggest the second track when the records look substantial, whether they sit as acquirer, lender or creditor. The special situations referral page covers the angles for each seat.

For an investor who is also the buyer, the logic holds. Separating the license means the investment committee never underwrites data revenue, while the seller and its creditors capture what the records are worth to the buyers who want them. Where a failing company is choosing between selling its team, its product or both, acqui-hire vs asset sale vs data license compares the options.

Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 per referred company, paid only after the buyer pays and SourceX receives its fee. No reward is guaranteed, and the reward is never deducted from what the company receives. Investors should check their fund's own policies on fees connected to portfolio or target companies.

Limits and open questions

• No reliable comparables. Value is set by what buyers offer for specific records, and a company can pass qualification and still receive no offer.
• Exclusivity has a cost. An exclusive AI-training license for an agreed term may limit what an acquirer can do with the same records, so it has to be disclosed and drafted around.
• Rights come first. Records that belong to clients, consumer personal data and patient health information can sink an otherwise strong dataset.
• Timing. A license pays after selection and invoicing, so it does not help a party that needs cash at closing.
• Accounting and tax treatment depend on structure and need the seller's own advisers.

This is general information, not legal, tax or financial advice. Confirm with your own counsel, tax adviser or professional body before acting.

Next step

Screen the seller with the company fit checker before the asset purchase agreement is final. If it fits, register as a partner and introduce the seller or its fiduciary while the records are still intact.