DAVID HAIGH - Adams & Adams › wp-content › uploads › 2016 › ... · A brand valuation helps marketers understand what a brand is worth across different products and markets

2.

DAVID HAIGH

BRAND FINANCE PLC,

Chief Executive

3.

David Haigh, Chief Executive, Brand Finance plc

November 2016

Annual BRICS IP Forum ConferenceDo you know what you stand to lose? Why valuation is key to brand protection

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0.1 Understanding intangible asset value

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• Covering the world’s leading stock markets

• 58,000 companies

• 120+ Countries

• 69 Sectors

• Trend from 2001-2015

• $89 trillion of Enterprise Value (EV)

• $47 trillion or 53% is tangible assets

• $42 trillion or 47% is intangible assets

• $31 trillion or 34% is ‘undisclosed’ intangible assets

Understanding Intangible AssetsGlobal Intangible Finance Tracker (GIFT™) 2016

6.

11 11 12 14 14 1722 23

27 25 26 28 3033

47

1 1 1 1 22

3 3

43 4

5 55

5

2 2 3 3 34

5 4

55

56 5

6

7

1611

1619

22

25

30

8

21 2615

1824

27

31

0

10

20

30

40

50

60

70

80

90

100

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Undisclosed Value Disclosed Goodwilll Disclosed Intangible Assets (ex g/w) Tangible Net Assets

Uncertainty about fair value is a major issueGlobal Enterprise Value 2001 – 2015 (USD trillion)

Undisclosed intangible

value

Source: 2016 BrandFinance® Global Intangible Finance Tracker (GIFT™)

7.

36%

44%38% 37% 35% 35% 37%

60%

48%42%

51% 50% 47% 47%53%

4%

5%

4% 4%4% 4%

5%

8%

7%

5%

9% 8%7% 7%

6%

7%

9%

8% 8%8% 8%

8%

11%

8%

9%

11%10%

8% 8%8%

53%

42%50% 51% 54% 53% 51%

20%

37%43%

29% 32%38% 37% 34%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Global Enterprise Value Breakdown (%)

Undisclosed Value Disclosed Goodwilll Disclosed Intangible Assets (ex g/w) Tangible Net Assets

Intangible assets account for almost half of global enterprise value

Global Enterprise Value 2001 – 2015 (%)

Intangible assets(47%)

Tangible assets(53%)


8.

30%

19%

17%

16%

12%

12%

12%

12%

9%

9%

9%

2%

4%

17%

11%

6%

12%

6%

7%

7%

12%

5%

12%

19%

17%

11%

12%

4%

20%

33%

48%

74%

66%

48%

61%

71%

65%

79%

64%

51%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Food

Internet

Software

Media

Healthcare-Products

Cosmetics/Personal Care

Pharmaceuticals

Biotechnology

Aerospace/Defense

Advertising

Tangible Net Assets Disclosed Intangible Assets Disclosed Goodwill Undisclosed Value

IntangibleTangible

The tangible / intangible value split varies across sectors


9.

57%

57%

56%

50%

47%

43%

39%

38%

37%

32%

10%

3%

5%

4%

4%

3%

4%

4%

17%

8%

19%

11%

5%

5%

7%

7%

8%

7%

13%

5%

15%

29%

34%

41%

42%

47%

49%

51%

33%

55%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Office/Business Equip

Building Materials

Airlines

Semiconductors

Chemicals

Electronics

Hand/Machine Tools

Leisure Time

Telecommunications

Apparel


IntangibleTangible



10.

IntangibleTangible



99%

91%

86%

84%

83%

83%

77%

76%

70%

66%

4%

4%

3%

11%

3%

2%

3%

9%

5%

2%

6%

2%

3%

1%

3%

6%

7%

2%

2%

3%

-8%

3%

8%

4%

11%

9%

12%

13%

23%

29%

-10% 10% 30% 50% 70% 90% 110%

Iron/Steel

Oil&Gas

Shipbuilding

Coal

Mining

Banks & DFS

Insurance

Auto Manufacturers

Energy-Alternate Sources

Textiles


11.

30%

33%

33%

40%

40%

41%

43%

44%

45%

46%

3%

9%

7%

8%

5%

8%

6%

6%

12%

12%

5%

18%

12%

12%

10%

6%

9%

9%

20%

14%

61%

41%

48%

40%

45%

45%

42%

42%

23%

28%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Denmark

Belgium

United States

United Kingdom

Ireland

Mexico

Switzerland

Sweden

France

Germany

Tangible Net Assets Disclosed Intangible Assets Goodwill Undisclosed Value

IntangibleTangible

The tangible / intangible value split varies across nations


12.

46%

52%

52%

57%

58%

58%

60%

64%

73%

74%

4%

4%

5%

8%

5%

2%

9%

14%

4%

11%

3%

2%

8%

13%

7%

1%

12%

13%

4%

8%

47%

41%

34%

22%

29%

38%

19%

8%

19%

8%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

South Africa

India

Australia

Netherlands

New Zealand

China

Spain

Italy

United Arab Emirates

Brazil

Tangible Net Assets Disclosed Intangible Assets Goodwill Undisclosed Value

IntangibleTangible



13.

IntangibleTangible



95%

95%

101%

105%

116%

120%

122%

123%

124%

125%

2%

3%

5%

7%

3%

4%

7%

5%

3%

2%

2%

2%

3%

1%

3%

0%

3%

1%

2%

2%

2%

-8%

-12%

-23%

-24%

-32%

-29%

-28%

-28%

-20% 0% 20% 40% 60% 80% 100%

Hong Kong

Croatia

South Korea

Romania

Russia

Macedonia

Greece

Cyprus

Mauritius

Ukraine


14.

Goodwill

Literary works

Musical works

Trademarks and Logos

Domain names

Customer contracts

Customer lists

Favourable supply contracts

IT

Databases

Technical know-how

Patents

Goodwill

Artistic

Marketing

Customer

Contract

Technology

Working

Capital

Plant &

Equipment

Land &

Buildings

Intangible assets

Tangible assets

Illustrative Examples – this is not a complete list of all possible intangibles in these classes

Understanding intangible assets

15.

Business Value Breakdown Breakdown of intangible assets for all the BRICS countries combined

2016 - USDbn

Enterprise

Value

Tangible

Net Assets

Intangible

ValueUndisclosed

Intangibles

Goodwill (10%)Technology (20%)

Contract (15%)

Customer (20%)

Marketing (35%)

Disclosed

Intangibles15,649

6,200 5,428

2,170

9,449

772

1,240

930

1,240

620

Enterprise Value Asset breakdown Intangibles(split by disclosure)

Intangibles(split by type)

Enterprise

Value

Tangible

Net Assets

Intangible

Value

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0.2 How to value IP assets?

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IP Project approach and timelineOur proposed work steps are designed to create an understanding of the IP’s contribution to

business value creation

3.2 Analysis

Identify interaction

effects

3.1 Analysis

of Guide Michelin1. Discovery & Data

Audit

2.2 IP Value Modelling

Assumptions

2.1 Quantify

IP Strength2.3 Calculate IP Value

IP Valuation Modelling

• Understanding of the market dynamics and value drivers for the Company’s IP

• Ensuring there’s enough data to conduct the valuation

• Align with stakeholders on objectives

• Data gathering

• Review of IP documentation

• Quantify the strength of the patent portfolio relative to its competitors

• This is intended to represent a ‘balanced scorecard’ of attributes that influence the strength of the IP

• IP Strength Analysis

• Appraise the company’s forecast performance

• Conduct analysis required to deliver key valuation assumptions for the model

• Forecast financials, royalty rate ranges, discount rates, growth rates…

• Bring together all data sources to quantify the financial value of the IP portfolio and their contribution to business value

• Value will be segmented by territory

• Model and findings will be presented in a report format

18.

IP approaches and methods

Approaches

Income splitMulti-period excess

earnings

Incremental cash

flow

Indirect Methods

Market ApproachCost Approach Income Approach

Price PremiumVolume PremiumRoyalty Relief

Direct Methods

19.

Brand Strength

Index (BSI)

A brand strength

benchmarking

process with a

score expressed

out of 100.

1

Brand Royalty

Rate

The BSI score is

applied to a sector

royalty rate range

to identify an

appropriate rate

2

Forecast

Revenues

The royalty rate is

applied to forecast

revenues to derive

brand revenues

3

Brand Value

Post-tax brand

revenues are

discounted to a net

present value

which equals the

brand value

4

We use royalty relief, a proven & robust brand

valuation methodology

20.

Why value ‘brands’?There are many reasons to value brands and they fall largely into two categories

Balance Sheet

Taxation Planning & Compliance

Litigation Support & Dispute Resolution

Joint Ventures

Financing

M&A

Investor Relations

Bankruptcy

Internal Management

Internal Licensing

Portfolio Management

Brand Architecture

Brand Strategy

Budget Setting

Brand Scorecards

Technical Reasons:Commercial Reasons:

21.

0.3 What do we mean by brand?

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What do we mean by ‘brand’?Trade marks (i.e. word mark, logo and strap line registrations), associated marketing IP

(specifically domain names, trade dress, advertising copyrights, brand guidelines and

manuals) together with the goodwill associated with those trade marks and marketing IP

• Trade Names,

• Trade Marks,

• Service Marks,

• Symbols,

• Logo

• Smells,

• Sounds,

• Slogans

• Product Design,

• Packaging Design,

• Trade Dress

• Coats of Arms,

• Certification Marks,

• Unique Accreditations

• Colours

• Websites,

• Social Media Sites,

• Publications

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A brand valuation helps marketers understand what a brand is worth

across different products and markets and establishes a baseline for

performance management.

The exercise involves a detailed, segmented valuation of the branded

business indicating the key drivers of value and ends with a specific asset

valuation of the brand alone.

Research and financial data is used to benchmark the subject brand is

against its peers at a segment level to assess in which areas it is strong or

weak.

This provides a greater understanding of a brand’s positioning and a planning

framework for long term strategic marketing investment.

Brand valuation underpins a value driven approach to

brand management

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Bra

nd

Valu

e

A brand should be viewed in the context of the business in which it

operates. This is why we always conduct a Branded Business

Valuation when doing brand valuations.

A Branded Business is the value of a single business operating under the

subject brand / trademark. This value would be equal to Enterprise Value in

case of a single branded business.

Brand Contribution captures all of the value that the brand brings to the

business. We also refer to this as “Strategic Brand Value”.

Brand Value, in Brand Finance terminology, is an accounting –based

valuation which calculates the value of the transferable element of the

brand. We also refer to this as “Trademark Value”.

The value of a brand’s contribution far exceeds the

value of the transferrable asset

®

+ Uplift

25.

Why Value Brands?Brand affects a wide range of stakeholders

Potential

Customers

Existing

Customers

Influencers

e.g. Media

Trade

Channels

Strategic

Allies &

SuppliersInvestors

Debt

providers

Sales

Production

All Other

Employees

Middle

Managers

Directors

Brand

26.

Why Value Brands?Financial impact maximised through a consideration of all brand stakeholders

Stakeholder Effects Business Value Drivers

Customers• Greater sales volumes

• Price premiumsRevenue & Costs

Suppliers• Lower prices

• Better terms

• Greater willingness to partner

Costs

Staff• Lower recruitment costs

• Lower retention costs

Recruitment Costs

Training costs

Financiers• Lower borrowing costs

• Better repayment conditions

• Higher price earnings ratio

Cost of Equity

Cost of Debt

Regulator• More invitations to tender

• Greater propensity to award

Revenue

Long term growth

Media• Influencing the attitudes of direct

stakeholdersRevenue

Public• Influencing the attitudes of direct

stakeholdersCosts of Public action B

ran

d &

Bu

sin

ess v

alu

e

Direct

Ind

ire

ct

27.

International Standards: ISO 10668‘Best Practice’ requirements for a brand valuation to be ISO compliant

Transparent

Consistent

Independent

Legal

Behavioural

Financial

Analysis Objectives

28.

World’s Most Valuable Brands 2016 – Brand FinanceRANK BRAND BRAND VALUE (USDm)

2016 2015 2016 2015

1 1 145,918 128,303

2 3 94,184 76,683

3 2 83,185 81,716

4 8 69,642 56,124

5 4 67,258 67,060

6 5 63,116 59,843

7 6 59,904 58,820

8 7 53,657 56,705

9 11 49,810 47,916

10 15 44,170 34,925

29.

Brazil’s Top 5 Most Valuable Brands 2016 – Brand Finance

RANK BRAND BRAND VALUE (USDm)

2016 2015 2016 2015

274 234 5,122 5,945

418 137 3,712 9,021

440 211 3,579 6,549

467 466 3,432 3,503

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Russia’s Top 5 Most Valuable Brands 2016 – Brand Finance


2016 2015 2016 2015

205 147 6,807 8,668

230 245 5,985 5,791

299 187 4,773 6,961

437 390 3,601 3,977

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India’s Top 5 Most Valuable Brands 2016 – Brand Finance


2016 2015 2016 2015

89 68 13,688 15,378

162 212 7,886 6,521

209 287 6,651 4,927

244 330 5,768 4,524

246 210 5,760 6,563

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China’s Top 5 Most Valuable Brands 2016 – Brand Finance


2016 2015 2016 2015

9 11 49,810 47,916

14 22 36,334 27,459

15 27 35,394 26,417

20 37 32,264 22,714

31 46 27,735 20,392

33.

South Africa’s Top 5 Most Valuable Brands 2016 – Brand Finance


2016 2015 2016 2015

37,002 54,027

21,970 20,029

19,761 18,232

18,922 17,506

17,386 14,396

None of the South African brands were included in our Global 500 study.

34.

0.5 Why valuation is key to brandprotection

35.

Do you know what you stand to lose? Why valuation is key for brand protection – an inbound and outbound perspective

What do internationals lose if their IP is not protected? What do local players lose if their IP is not protected ?

The above examples highlight the importance for brand owners to strategically plan and execute their trademark filling

programme early to avoid having to engage in lengthy administrative litigation for the recovery of their trademark in the

future.

British Racing Motors

36.

IP Rights and International TransferTATA – Land Rover

• Tata Motors purchased Jaguar and Land Rover from Ford Motor Company in 2008 at a price of US$2.3 billion – biggest deal in the Indian auto sector.

• Tata bought the two brands, along with their manufacturing plants and intellectual property rights – new company being called ‘Jaguar Land Rover’

• The biggest benefit for Tata Motors: the acquisition of two prestigious global brands

37.

Contact us

Brand Finance is the leading brand valuation and strategy firm,

helping companies to manage their brands for improved business results.

www.brandfinance.com

Brand Exchange

3 Birchin Lane

London, EC3V 9BW

United Kingdom

David Haigh CEO

Brand Finance plc

E. [email protected]

T. +44 20 7389 9436

38.

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DAVID HAIGH - Adams & Adams › wp-content › uploads › 2016 › ... · A brand valuation helps marketers understand what a brand is worth across different products and markets