Brands and Intangible Assets are widely accepted to be the key drivers and contributors to the value and growth of businesses. However, despite their widespread acceptance that intangible assets and brands are critical to the future prospects of any business, they are traditionally considered to be complicated to measure in terms of ‘value’, and its ongoing management and communication.
Bankers, Investors, analysts and other stakeholders are getting increasingly alert to the importance and ‘value’ of intangible assets and are keen to bridge the information gap that has existed until recently.
More and more bankers and financial institutions are agreeing to securitize and fund against reputed brands and strong intangibles as collateral security.
Hence the financial role of intangibles has increasingly been recognized and their growing importance is reflected in the value that brands and other intangibles add to the bottom line.
Not only is there a compelling financial reason for more rigorous intangible asset management processes, the tax and accounting regimes are demanding that numbers are allocated to intangible assets as part of accounting for acquisitions. And it doesn’t end there; the value of these intangible assets is required to be monitored on an ongoing basis.
At RBSA Brand and Intangible Advisory we have the expertise to help our clients’ ascertain and assign the accurate value to their intangible assets and brands using approaches which are globally accepted and understood.
We have a close working relationship with several local and international firms who can provide seamless legal services, brand building, design and marketing solutions to our clients making us a one stop shop for all brand and intangible asset related requirements.
What is an Intangible Asset?
Intangible assets are defined as identifiable non-monetary assets that cannot be seen, touched or physically measured, which are created through time and/or effort and that are identifiable as a separate asset. There are two primary forms of intangibles - legal intangibles (such as trade secrets e.g. customer lists, copyrights, patents, trademarks and goodwill) and competitive intangibles (such as knowledge activities (know-how, knowledge), collaboration activities, leverage activities, and structural activities).
Legal intangibles are known under the generic term intellectual property and generate legal property rights defensible in a court of law. Competitive intangibles, whilst legally non-ownable, directly impact effectiveness, productivity and opportunity costs within an organization - and therefore costs, revenues, customer service, satisfaction, market value, and share price. Human capital is the primary source of competitive intangibles for organizations today. Competitive intangibles are the source from which competitive advantage flows, or is destroyed.
Categories of Intangible Assets
• Marketing related: Trademarks (Brands), trade names, service marks, newspaper, mastheads, internet domain names, non-competition agreements.
• Contract-based intangible assets: Licensing and royalty agreements, advertising, construction, service or supply agreements, lease agreements, franchise agreements, employment contracts.
• Technology-based intangible assets: Patented technology, computer software, unpatented technology (know-how), databases, trade secrets such as secret formulas, processes and recipes.
• Customer-related intangible assets: Customer lists, order or production backlogs, customer contracts and customer relationships including non contractual relationships.
• Artistic-related intangible assets: Plays, operas, ballets, books, magazines, newspapers, pictures, photographs.
Why value your intangible asset?
• For balance sheet purposes
• For mergers and acquisitions
• For reporting under IFRS, US GAAP and Indian GAAP
• Joint-venture negotiations (eg. to prevent overpayment)
• Investor relations
• Licensing and Franchising (eg. to set the right price)
• Obtaining Finance
• Bringing the importance of brands to the attention of the board
Intangible assets and most notably brands, are vital strategic and financial assets which impact key business value drivers.
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