Intellectual Property, Brand & Patent Valuation
We help our clients turn intangible assets into tangible value. We understand how to value these assets, because Gordon Brothers actively invests in them. Our valuation models reflect this experience and set us apart from the competition. We also use a proprietary database of licensing transactions built from decades in the business and leverage the experience of experts who have worked to transition branded products through a licensing model into multiple channels of distribution.
We have experience valuing brands, trademarks/trade names, customer lists, URLs, contracts, patents, trade secrets, unpatented technology and knowhow, copyrights, goodwill, and other intangible assets. Our valuations quantify intangible assets for a variety of purposes, including financing, mergers and acquisitions, financial reporting, litigation, and business planning.
By the Numbers
What is the value of intangible assets and intellectual property?
In most cases, a business' balance sheet commonly undervalues intangible assets, including intellectual property. Unlocking and maximizing the value of intangible assets can be realized by carefully documenting an expansive list of key business operations in categories related to marketing, customers, technology, contracts, artistic creations, workforce, and research and development. Once established, valuation experts can access market transaction databases and other market research while using income, market or cost based valuation approaches to determine the value of the company’s intangible assets.
How do you value a workforce?
Whether buying or selling a business, one of the most important intangible assets is the assembled and trained workforce. While the value of assembled workforce is not stated on the company’s balance sheet directly, it is part of goodwill. The institutional knowledge of established employees is essential for a business to retain its value. Determining workforce value relies on a variant of the cost approach called the costs-avoided method, which analyses assembled workforce costs such as avoided recruiting or training costs, and the cost of productivity loss avoided by having a trained workforce. The total value of the workforce is the sum of these costs avoided. The valuation analysis assumes the company is operating as a typical marketplace employer, which means employee wages stand at market-driven rates. Any figures required for the analysis are typically provided by company management and market research.
How much is a patent worth?
Any asset is worth what someone is willing to pay for it. While every patent is unique, a “relief-from-royalty” valuation method can help quantify its potential value. A variant of the income and market based approaches, this technique assumes the owner of the intangible asset is relieved from paying a royalty to others to obtain its use. A key in determining the value of a patent is in identifying market-based royalty rates, patent licensing potential. Also critical is the obsolescence cycle or curve of the patent and its statutory remaining life. Assessing market demand and interest is also important and determined by analyzing transactions of similar patents to determine appropriate valuation ranges.
How is a business valued?
A business is valued by considering either its financial performance or the underlying assets. Appraiser should consider the three primary approaches to value; the Income, Market and Cost approaches. The approaches that will be relied upon will be impacted by various factors including the type of company it is and its operating performance. In most cases, an analysis of projected earnings will be performed to determine the value of the company. Many factors are considered including, but not limited to: historic and projected profitability, various risk factors, sale prices of similar companies, and the marketability of the company. For asset intensive companies, the value of its underlying assets might represent the value of the company as a whole, in which case an appraisal of the underlying assets should be performed.
What business valuation methods are used to value a company?
Generally, there are three approaches to value any asset: the cost, market, and income approaches. Each approach has several methods that can be applied in an analysis. The cost approach assumes that an investor would pay no more for an asset than the cost to acquire or construct a comparable asset. While the cost approach is most frequently used for tangible assets, it can also be used in valuing a business in that under-performing companies are sometimes only worth the underlying value of its assets. The market approach uses prices and information from actual, arm’s-length market transactions involving comparable companies. The income approach converts future expected amounts of after-tax cash flows to a present value. This present value of future expected benefits represents the value of the company. Depending on the appraisal purpose, any one, two, or all three approaches might be applicable to a particular business valuation assignment; it is up to the appraiser, based on the facts and circumstances, to decide which ones apply to the assignment at hand.