Trademarks are important and often valuable intangible assets that help companies to distinguish goods and services. They exist so that entities have legal protection of a name, symbol, design, letter or word. Trademarks create value by inspiring loyalty, motivating purchasing and commanding premium pricing. And the value of a trademark can be monetized to generate cash to further growth and investment through licensing or collateralization. Valuation of trademarks is essential for many business transactions including any merger or acquisition, bankruptcy, trademark sale or purchase and to establish royalty rates for licensing. Appraisals can also be used for tax reporting or as support in various litigation matters. AccuVal’s trademark valuations are always backed by proven valuation methodologies and withstand the scrutiny of courts.
The first step in determining the value of a trademark is understanding the specific use of the appraisal and familiarization with the fundamentals of the trademark. AccuVal seeks to understand the history of the trademark, the overall costs invested into it, the historical and projected income stream and profit margin associated products or services, and the competitive landscape of the industry. Name recognition and market share studies can be helpful in providing insight as to the market’s perception and buying behavior and are important considerations in the valuation of trademarks.
With this context and these data, determining the value of a trademark is more accurate and reflective of the real world. There are three primary approaches to valuation of trademarks: income, market and cost approach.
Primary Trademark Valuation Methodologies:
- Income approach to trademark valuations In the income approach, we utilize either the discounted cash flow (DCF) method and/or the capitalization of earnings method to estimate the net present value of the trademark’s anticipated future cash flows and profits.
- Market approach to trademark valuations This approach seeks to compare the pricing of similar trademarks. To do this, AccuVal identifies key characteristics of the trademark being examined and checks that criteria against an extensive database of transaction information. When comparable marks are found, royalty rates and transaction prices are analyzed to determine what the market is paying for like assets.
- Cost approach to trademark valuations This approach examines the investment required to replace the trademark or essentially recreate it.
Valuing a trademark is complex, but AccuVal makes it easy for our clients by asking the right questions up front so that research and analysis stays focused on the areas that matter. With decades of experience valuing businesses across more than 100 industries, our appraisal experts know how to translate intangible assets into tangible value.
What is included in the appraisal?
- Well-supported and defensible independent opinion of value
- Narrative of the history and nature of the trademark(s)
- Statement describing and explaining the purpose, scope, value definition and asset definition of the appraisal
- Detailed industry and economic overviews relating to the products/services that the trademark(s) cover
- Detailed qualitative and quantitative analysis of the trademark(s), including (when possible):
- Income approach to value
- Market approach to value
- Cost approach to value
- Overview of methodology, assumptions and limiting conditions
- Detailed exhibits that support computations and analysis
What factors are considered when determining value?
- Qualitative and quantitative characteristics of the trademark(s)
- Earnings capacity and profitability relating to the trademark(s)
- Market share supported by, or as a result of the trademark(s)
- Market recognition analysis of the trademark(s)
- Legal rights and restrictions to the trademark(s)
- Contracts associated with the trademark(s)
- Competition, barriers to entry and risks associated with the trademark(s)
- Product life cycles and positioning
- Historical growth and prospects for the future
- Exploitation opportunities of the trademark(s) into new markets/products
How do I get started?
The following is needed to determine how AccuVal can help:
- Background information on the trademark(s) to be valued
- Financial information relating to the trademark(s) by product/service line (if available)
- Description of the company and its operating divisions
- Brief description of the products and services produced by the company
- Copies of past appraisals
- Market recognition studies or surveys
- Value definition(s) required
For more information or to request a proposal: