Intangible Valuation

Brand Valuation refers to the process of determining the value of a brand in terms of the financial value perceived or money that a third party is ready to pay for. It includes two aspects namely economic value and social aspect. When businesses are in negotiations for getting acquired, they look for leveraging some of their intangible assets so as to spruce up their balance sheet. Hence, business assets are categorized as tangible and intangible assets as described in the below table:-

Tangible Assets	Brand Affiliated Intangibles	Non- Brand Affiliated Intangibles
Property	Proprietary Processes	Customer Relationships
Machinery	Trade Secrets	Market Access
Equipment	Talent	Financial Performance
Raw Materials	Public Knowledge	Growth

Intangible Valuation Determinants

Intangible asset is an identifiable, non-monetary item without physical substance, which is within the control of the entity and is capable of generating future economic benefits for the entity;
An asset is identifiable if it is either:

separable, i.e. is capable of being separated or divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the entity intends to do so. Or,
arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

Types of Intangible Assets

Customer- Customer lists, Order backlog, Customer contracts and related customer relationships, Non-contractual customer relationships
Technology- Patented technology, Computer software, Unpatented technologies, Databases, Trade secrets, such as secret formulas, processes, recipes, InProcess Research and Development
Contract based- Licensing, royalty, advertising, service, supply contracts, lease agreements, construction permits, franchise agreements, mortgage servicing contracts, broadcast rights
Marketing- Trademarks, trade-names, Service marks, collective marks, certification marks, Newspaper mastheads, Internet domain names, Non-competition agreements
Artistic Plays- operas, ballets, musical compositions, song lyrics, advertising jingles, books, magazines, newspapers, photographs, video, motion pictures, music videos, television programs

Key Methods

Multi Period Excess Earnings Method
Relief from Royalty
Profit Split Method
Incremental Cash Flow Method (“with and without”)
Replacement Cost Method

Understanding Brand Licensing

Brand licensing refers to licensee taking brand rights over a product line, making profit by creating and selling merchandise around it thus enabling gain royalty fees from product companies. It achieves supplementary support from manufacturer’s marketing spends for increasing sales and thus facilitating gain market share of the brand through outreach to unknown territories where manufacturers have better hand. Example, Apple’s iPhone did not get involved in manufacture of accessories for its own phone rather encouraged vendors build accessories around its iPhone brand motivating innovative products. However the licensor lacks control over the manufacturing process and distribution channels. Multiple products unrelated under same brand leads to confusion amongst consumers. Licensing agreements miserably fail from incorrect product timing and unsuitable distribution channels.

Brand Valuation Ranking Realty

A number of global research companies at ranking of top global brands by valuating brands that act as a marketing tool for businesses to promote their brands. Most of them work in conjunction with brand owners with the intention of bringing their brand value to light and thus infusing a sense of pride and satisfaction amongst customers owning the brand. Ranking thus arrived are not consistent and grossly vary with wider margin. Example, take the case of Google which was valued in the range of 68.6 through 158.8 billion USD during 2014. Similarly, Microsoft when it acquired LinkedIn in 2016, it was valued at USD 26.9 billion. Here again most of the brand valuation companies ranking failed.

Brands, Patents, trade mark & technical know how are important intangibles, thus it is important to value these intangible separately instead of allocating everything as goodwill. But the real challenge in intangible valuation is identifying the categories of intangible because intangible can be in form of Technology, Customer, Contract, Brand or Marketing. Hence for regulatory purpose also Intangible Valuation is required for Purchase Price Allocation. We have got expertise in Intangible/Brand Valuation, by using globally accepted Intangible method.