Brand Valuation of Intangible Assets: Hot Topics for 2014 and Beyond

Kristin Geboers, Senior Manager Product Marketing, 
Thomson Reuters 

• Essential in brand value creation: get the basics right
• The brand life cycle
• Name Creation: What Can Be Registered?
• Name Creation: Choose Your Trademark Wisely
• Trademark Clearance: Best Practices
• Trademark Registration: Best Practices
• Trademark Management / Renewal: Best Practices
• Trademark Protection: Best Practices
• Online Brand Protection: Business Challenges
• 3 Key Take Aways

• Identification of the nature and reasons for value of the brand is critical to valuation:
• Is it protected: trade dress or trademark or registered company name?
• Signal of quality, association with reputation of company and company goodwill
• Provides a barrier to entry and competition
• Familiarity leading to greater visibility and volume sales
• The Costs of Maintaining and Retaining Brand Value Need to Be Identified and Measured
• Value erodes naturally over time in the absence of effort and may erode as a result of “regression to the mean”
• Advertising and marketing expense and strategy tied to brand value need to be identified and quantified
• Cost of maintaining image and quality, preserving quality control may need to be additionally quantified
• How do Brands generate value, revenue?
• Caveat: Often brand value is not easily separated from goodwill and customer relationships and intellectual property
• Enhancement of revenues through premium pricing (increased pricing and greater gross margins) or greater volumes or some combination of the two relative to generic competition
• Reduction in direct selling expenses and marketing and advertising expense through “walk in” or often now “click through” sales as a result of “front of mind” presence of brand
• Valuation is often not simple and may be subjective or produce a range of value.
• Revenue benefits may be separately modeled or approximated by a relief from royalty method. Relief from royalty needs to be estimated by some method of comparison with generic or guideline reference prices, rates, volumes.
• Expenses associated with increasing or maintaining brand awareness and perceived quality/reputation need to be identified and grossed up for overhead and management.
• The profits and value associated with a brand are often limited by the overall margins and the existence of other intangible and tangible assets required to generate the associated revenues. This can and surprisingly often does mean well-known brands may have little real value (Surprising examples!).
• Future income must be forecast with realistic projections of risk of declining revenue and expenses or modeled with some attrition rate over time.
• Discount rates are typically greater than the cost of capital of the company and are typically associated with greater systematic risk and less leverage and more equity associated with brand values.
• Issues with valuation of brands in the context of allocation of purchase price and asset impairment/goodwill impairment studies
• Concept of capital charges for use of assets
• Reconciling values such that the sum of parts equals the whole
• Priority in valuation and allocation when the sum of the values of assets exceed the value of the business
• Brands sometimes sell for consideration after the business fails.
• Why and what is the buyer paying for? Examples.
• Brand valuation in the context of trademark, trade dress or copyright infringement actions.

Thomas Giordano, ASA, CFA , Director, 
Anchin, Block & Anchin LLP 

• Brand – Overview
  • Definition
  • Recent News
• Brand Value
  • Top Brands
  • Measure
• Brand Value – Methods – a Standard
  • Valuation Approaches
  • Income Methods
  • Background Inputs
  • Valuation Purposes
• Brand – Value & Equity – Perspective