Brand valuation – an introduction
INTA’s Brand Value Special Task Force Report broke new ground exploring brand valuation practices and offering a blueprint on how trademark professionals can – and should – position themselves at the heart of the brand valuation conversation. In this way in-house practitioners can further embed themselves in the corporate structure, while external counsel can open the door to future revenue growth and diversification. A first step towards being able to engage with clients and corporate stakeholders on this all-important issue is to develop a nuanced understanding of brand valuation and evaluation. Historically, though, a maze of methodologies and rules has confounded many non-finance professionals.
In Brand valuation: a recent history we present a recent history of brand valuation, before Brian M Daniel, vice president of Charles River Associates, provides an insightful overview of the fundamentals of brand valuation and evaluation, including the two ISO standards governing these activities. As he explains: “Increasing their understanding of and gaining experience on valuation projects will help practitioners make valuable contributions to their organisations, such as identifying opportunities for brand growth or more efficiently and proactively addressing valuation issues as they arise in a variety of business, regulatory and dispute contexts.”
There is no confusion that brands, as an asset, have become a central driver of growth, helping companies to withstand difficult economic conditions. In our article on the brand value landscape: a lot has changed during the past 15 years, Brand Finance analysis reveals that the value of the top 100 most valuable brands has not only tripled over the past 15 years but has even grown by 5% over the past year, despite the pandemic – a timely reminder that strong brands can serve as a safe haven for capital in times of economic uncertainty.
Further evidence of this can be found in the WTR Brand Elite project, which follows the stock performance of brand-focused companies and sheds light on the possible links between brand investment and financial success. As we reveal in Tracking brands on the stock market, our collection of brands recorded a 4.4% return across 2020, outperforming a number of major stock market indices, including the New York Stock Exchange and the FTSE 100.
Thus, strong brands help companies to weather choppy seas and contribute significant value. But accounting rules mean that much of the value derived from – and attributed to – brands is missing from company balance sheets. Christof Binder, managing partner of Trademark Comparables AG, MARKABLES, explains why their value remains significant in his rundown of the 50 most expensive brands and portfolios acquired over the past two decades (see Onto the balance sheet: the most valuable brand acquisitions since 2000).
In short, brands built on the legal protection offered by trademarks and design rights are not only important, they are also becoming more popular and rising up the corporate agenda. It is therefore critical that legal brand professionals are central to valuation and exploitation discussions.