Brand Values and Valuation in Current Economic Downturn

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  • Brand Values and Valuation in the Current Economic Downturn

    IP Business CongressChicago, IllinoisJune 21-23, 2009Presented by:Weston Anson, ChairmanCONSOR Intellectual Asset Managementwanson@consor.comwww.consor.com

  • Market Trends: IP SpecificIncreasingly, valuable IP assets used as a financing vehicleMergers and strategic alliances based on IP assetsLeveraging the full bundle of IP rightsUnused brand value as a source of working capitalAccurate valuation of brands and IP grows in importanceGlobal awareness of market value of IP / ITFinancial reorganization impacts brand values

  • Brand Value IssuesDeteriorating economic conditionsRetail turmoil and consolidationConsumer indifferenceWalMart-ismManufacturer consolidationShifting social valuesQuicker cycles, shorter livesHouse brands and other constraintsPrivate label / store label growth

  • New Issue: BankruptcyMervynsGoodysGottschalkKB ToysCircuit CityLinens N ThingsFortunoff GMChryslerTower

  • Bundles of Intangible Assets

  • Case Study Tower RecordsInventory and investigative auditLogical groupingsTriageBenchmark valuationContext specificGoing concern value v. liquidation discountIdentify potential buyers / influencersDomestic International Market assets / close transactionsBrokers E-commerce listingsEnd users

  • Who Cares About Maximizing IP Value?Merger and Acquisition InterestsShareholdersTax AuthoritiesAuditorsWall Street Analysts

    Other StakeholdersInternal Asset ManagersPartnersInternational AffiliatesThe MediaFinders of Fact

  • Value Maximization AlternativesLicensingAuctionSaleCollateralizationSecuritizationCompetitive DispositionIP Holding CompaniesJoint Venture

  • Value is Context SpecificValuation is context specific and time criticalGoing concernReorganizationOrderly disposalLiquidation

    CONTEXT + TIME = VALUE

  • Context ContinuumA simple graph that illustrates what the CONSOR Context Continuum is. In the most basic of terms, it is a projection of relative values of a piece of intellectual property, measured along two dimensions:The vertical scale establishes the conditions under which the asset is being disposed, such as liquidation, fire sale, orderly disposal, reorganization or going concern.The horizontal scale measures time in monthly increments.

  • Traditional Valuation MethodsMarket ApproachSales of comparable assetsCost ApproachCost to develop to current statusIncome ApproachProjection of revenue / income attributable to the IPPrice PremiumRelief from RoyaltyTechnology Factor

  • Going Concern v. Disposal or Liquidation

  • Case Study - Budget Group, Inc.

    Company:Budget Group, Inc.Context:BankruptcyComponents:Core trademarkFranchise rightsReservation systemCustomer databasesAirport concession rightsCause:Loan Securitization / Sale of companyApproach:Comparable salesDiscounted royalty ratesConcept of Value:Relief from Royalty

  • Case Study - Budget Group, Inc.IP Valuation Summary

  • Value Extraction StrategiesDisposition

    Liquefaction

    Leverage

  • DispositionAuctionSaleCompetitive DispositionMerger & Acquisition

  • LiquefactionCollateralizationSecuritizationIP Holding Company

  • LeverageTraditional LicensingOther Licensing ModelsJoint Venture

  • Licensing IssuesLower RRsSmaller guaranteesLess upfrontMore renegotiationsMuch wider range of RRs (TMs = 2-12%)More flexibility in marketing contributionsShorter term

  • Licensing Royalty RatesThere is no typical royalty rate.The most frequent rate is 5% 39% of agreements are for less42% of agreements are for more.

    Source: RoyaltyStat.com

  • Value Maximization Case Studies

  • Five Critical Elements of Value Maximization1. Know where maximum strategic and realizable value is to be found in the asset portfolio2. Establish a realistic current market value for the assets3.Understand how to extract maximum value from the assets4. Select the best possible intellectual property / intangible asset strategy for the situation5. Manage the process

  • Brand Valhalla

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