The innovate or die scenario
Overview
Brand valuation is a complex and sometimes challenging task. As for the valuation of other, more tangible assets; apartments, companies and cars, it is only in a real market transaction that an actual value can be determined. In the case of a brand and trademark, complexity is added as it most often, is not synonymous with the entire scope of a business.
An established Swedish recruitment agency hired Rouse Consultancy to determine a market value for its trademarks in order to drive value from the operating company to a holding company owned by the founders. The client wanted to transfer ownership of its trademarks to a separate company to create new business models, open up opportunities for other ownership structures, and protect the trademark if the operational activities were to be severely affected by the societal situation of Covid.
The challenge for the client was to establish a market value for its trademarks that was correct and acceptable from a tax perspective. The owner needed help in valuing the trademarks through IP to be able to use the IP assets to facilitate the restructuring of the companies. A formation of a licensing agreement between the operating- and the holding company was of great importance to enable this innovative solution where a transfer of value would not be exposed to taxes. This puts a high demand on Rouse to deliver a result with accuracy and precision as it is a complex and comprehensive process to align with tax regulations and VAT. As the complete value of a company is not located in the company name, another challenge for Rouse was to determine how much of the company’s revenue could be attributed to its trademarks by isolating their contribution to the whole business. A positive prognosis subject to a high valuation of the trademark will directly increase the company's value.
Our approach
To map out all possible challenges in driving value from one company to another and to find and understand the economic effects for the client, the trademark valuation was obtained from information from the client, its management and independent third-party data collected and analysed by Rouse. Added to the research and data, a licensing structure was created and used to attribute a hypothetical license to the operating company’s trademark to see how much revenue would be generated if the trademarks were to be licensed. The primary economic valuation factors were investigated and analysed on future income, future profitability and financing dimensions, and were considered in conjunction with brand-specific analysis of reasonable license fee, scope and content. The trademark’s legal quality, strengths and weaknesses were also examined to structure a multi-component arrangement where licensing is linked to profit and revenue.
Value added
The course of the development of the process resulted in a transfer of the operating company’s trademark to the holding company which in turn pays license fees. The outcome exceeded the client’s expectations as not only the aim of driving value between the companies were realized but also made it possible for further success as the money being saved from taxes could be used for other investments. With experience and skillful help from Rouse, the client has obtained a value on its trademarks and an implemented licensing model that is still being used today and will continue to be of great future importance.
