Brands financial valuation

Brands financial valuation

Like other intangible assets, the brand (or trademark) is an asset. Brands’ value depends heavily on the income they generate or are likely to generate. Thus the financial valuation of a brand consists of estimating the value of the economic benefits achieved by the holder. The question of the financial valuation of a brand occurs in multiple situations such as:

  • The acquisition or transfer of the trademark
  • Capital transactions (due diligence, contributions,  assets transfers …)
  • The revaluation of the purchase price (PPA)
  • Strategic management of a brands’ portfolio
  • Litigation which involves assessing a prejudice related to the use of the trademark or the infringement of the brand image.

METHOD

Three major methodologies can be implemented depending on the context of the operation, the nature and characteristics of the brand and, of course, the available information:

  • the cost method based on the costs of incorporation or replacement of the trademark.
  • the over-profits method measures the contribution of the brand to the results generated by the company. The aim here is to determine, qualitatively and quantitatively, the relative strength of brand awareness and image in consumer purchasing decisions.
  • the royalty method is based on royalties for comparable brands in the same industry.

Taking advantage of the experience of its associates, Finantis Value implements a methodology, proven and compliant with the international standard for financial valuation of brands (ISO 10668), based primarily on the over-profits and proprietary tools .

We study the following points:

  • the legal aspects regarding the trademark,
  • the quality of the protection in force,
  • the positioning of the brand and its notoriety,
  • products and services or partnerships associated with the use of the brand
  • revenue and cost structure analysis,
  • the analysis of the risks attributable to the trademark and its use,
  • the contribution of the brand to the results, compared to other assets in the company.

At the end of our brand – or trademarks’ portfolio – valuation study, Finantis Value provides its client with a comprehensive strategic analysis report to support its operations. This report sets out the elements analyzed, our recommendations, the methods we used and the quantified conclusions we came to. This report is a real operational tool for the strategic management of the brands.

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