Brand Valuation = Mulya

Nirdharan

Aditya Upadhyay, NIFT Bhopal

 Brand valuation
When one company is bought by
another, there is often a huge
difference between the book value of
company assets and the price paid,
especially when they are strong brands
and show positive signs of growth.
This difference is termed as goodwill, it
can actually be elaborated as the
financial markets positive attitude to
the growth of the company.
 Valuation Approaches
Attempt to place a financial value on
brand equity for accounting purposes
Useful in cases of mergers and
acquisitions, brand licensing, fund
raising, and brand management
decisions
Valuation approaches:
Accounting background
Historical perspectives
General approaches
Interbrand s brand valuation methodology
 Accounting Background
Intangible assets are typically lumped
under the heading of goodwill and
include things such as patents,
trademarks, and licensing agreements,
as well as softer considerations such as
the skill of the management and
customer relations.
In an acquisition, the goodwill item often
includes a premium paid to gain control,
which, in certain instances, may even
exceed the value of tangible and
intangible assets.
The issue of fair evaluation of
brands
Price paid

Goodwill
Goodwill in literal sense
Patents
Brands
Sources of Goodwill
Gap: Database (large
Intangible meaning)
and Tangible Etc.
Equipment
Buildings
Net Assets
(Book Value)
 Evaluating brand valuation
methods
Valuation by historical costs

The logical approach is to add up all

the costs associated with a particular
period: development costs,
marketing costs, advertising costs,
etc. These costs are calculated
objectively and have been in the past
income statements.
 Valuation by replacement
costs
Place oneself in the present and to
confront the problem by resorting to
classic alternative- as we cannot buy
this brand , how much would be the
cost to recreate this brand?
 Valuation by market price
The valuation can be done by
equating the brand with the value of
a similar brand in the market .
The limitation is that such data might
not be available in the market as
brands are not bought to be sold
again.
 Valuation by royalties
What annual royalties could the brand
expect to receive if it is licensed to use the
brand ?
Companies use license to reach the
countries where they are not present.
However royalty fees doesnt include the full
use of the brand.
Arvind Brands represent Wrangler, Arrow, Nautica,
Jansport and Kipling. The Murjani Group is the licensee for
Calvin Klein Jeans, FCUK and Tommy Hilfiger. Beverly Hills
Polo Club (BHPC) is licensed to Spencers Retail.
Valuation by future earnings
Brand is an asset because it
generates future profits with
reasonable certainty
 Valuation by present
earnings/ Interbrands
valuation method
Calculating the net applicable profit :
average of profit for last three years
Assessing the brands strength in the
market
Calculating brand value:
World leadership
Growing markets
Unaided brand awareness