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2.
DAVID HAIGH
BRAND FINANCE PLC,
Chief Executive
3.
David Haigh, Chief Executive, Brand Finance plc
November 2016
Annual BRICS IP Forum ConferenceDo you know what you stand to lose? Why valuation is key to brand protection
4.
0.1 Understanding intangible asset value
5.
• Covering the world’s leading stock markets
• 58,000 companies
• 120+ Countries
• 69 Sectors
• Trend from 2001-2015
• $89 trillion of Enterprise Value (EV)
• $47 trillion or 53% is tangible assets
• $42 trillion or 47% is intangible assets
• $31 trillion or 34% is ‘undisclosed’ intangible assets
Understanding Intangible AssetsGlobal Intangible Finance Tracker (GIFT™) 2016
6.
11 11 12 14 14 1722 23
27 25 26 28 3033
47
1 1 1 1 22
3 3
43 4
5 55
5
2 2 3 3 34
5 4
55
56 5
6
7
1611
1619
22
25
30
8
21 2615
1824
27
31
0
10
20
30
40
50
60
70
80
90
100
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Undisclosed Value Disclosed Goodwilll Disclosed Intangible Assets (ex g/w) Tangible Net Assets
Uncertainty about fair value is a major issueGlobal Enterprise Value 2001 – 2015 (USD trillion)
Undisclosed intangible
value
Source: 2016 BrandFinance® Global Intangible Finance Tracker (GIFT™)
7.
36%
44%38% 37% 35% 35% 37%
60%
48%42%
51% 50% 47% 47%53%
4%
5%
4% 4%4% 4%
5%
8%
7%
5%
9% 8%7% 7%
6%
7%
9%
8% 8%8% 8%
8%
11%
8%
9%
11%10%
8% 8%8%
53%
42%50% 51% 54% 53% 51%
20%
37%43%
29% 32%38% 37% 34%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Global Enterprise Value Breakdown (%)
Undisclosed Value Disclosed Goodwilll Disclosed Intangible Assets (ex g/w) Tangible Net Assets
Intangible assets account for almost half of global enterprise value
Global Enterprise Value 2001 – 2015 (%)
Intangible assets(47%)
Tangible assets(53%)
Source: 2016 BrandFinance® Global Intangible Finance Tracker (GIFT™)
8.
30%
19%
17%
16%
12%
12%
12%
12%
9%
9%
9%
2%
4%
17%
11%
6%
12%
6%
7%
7%
12%
5%
12%
19%
17%
11%
12%
4%
20%
33%
48%
74%
66%
48%
61%
71%
65%
79%
64%
51%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Food
Internet
Software
Media
Healthcare-Products
Cosmetics/Personal Care
Pharmaceuticals
Biotechnology
Aerospace/Defense
Advertising
Tangible Net Assets Disclosed Intangible Assets Disclosed Goodwill Undisclosed Value
IntangibleTangible
The tangible / intangible value split varies across sectors
Source: 2016 BrandFinance® Global Intangible Finance Tracker (GIFT™)
9.
57%
57%
56%
50%
47%
43%
39%
38%
37%
32%
10%
3%
5%
4%
4%
3%
4%
4%
17%
8%
19%
11%
5%
5%
7%
7%
8%
7%
13%
5%
15%
29%
34%
41%
42%
47%
49%
51%
33%
55%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Office/Business Equip
Building Materials
Airlines
Semiconductors
Chemicals
Electronics
Hand/Machine Tools
Leisure Time
Telecommunications
Apparel
Tangible Net Assets Disclosed Intangible Assets Disclosed Goodwill Undisclosed Value
IntangibleTangible
The tangible / intangible value split varies across sectors
Source: 2016 BrandFinance® Global Intangible Finance Tracker (GIFT™)
10.
IntangibleTangible
The tangible / intangible value split varies across sectors
Source: 2016 BrandFinance® Global Intangible Finance Tracker (GIFT™)
99%
91%
86%
84%
83%
83%
77%
76%
70%
66%
4%
4%
3%
11%
3%
2%
3%
9%
5%
2%
6%
2%
3%
1%
3%
6%
7%
2%
2%
3%
-8%
3%
8%
4%
11%
9%
12%
13%
23%
29%
-10% 10% 30% 50% 70% 90% 110%
Iron/Steel
Oil&Gas
Shipbuilding
Coal
Mining
Banks & DFS
Insurance
Auto Manufacturers
Energy-Alternate Sources
Textiles
Tangible Net Assets Disclosed Intangible Assets Disclosed Goodwill Undisclosed Value
11.
30%
33%
33%
40%
40%
41%
43%
44%
45%
46%
3%
9%
7%
8%
5%
8%
6%
6%
12%
12%
5%
18%
12%
12%
10%
6%
9%
9%
20%
14%
61%
41%
48%
40%
45%
45%
42%
42%
23%
28%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Denmark
Belgium
United States
United Kingdom
Ireland
Mexico
Switzerland
Sweden
France
Germany
Tangible Net Assets Disclosed Intangible Assets Goodwill Undisclosed Value
IntangibleTangible
The tangible / intangible value split varies across nations
Source: 2016 BrandFinance® Global Intangible Finance Tracker (GIFT™)
12.
46%
52%
52%
57%
58%
58%
60%
64%
73%
74%
4%
4%
5%
8%
5%
2%
9%
14%
4%
11%
3%
2%
8%
13%
7%
1%
12%
13%
4%
8%
47%
41%
34%
22%
29%
38%
19%
8%
19%
8%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
South Africa
India
Australia
Netherlands
New Zealand
China
Spain
Italy
United Arab Emirates
Brazil
Tangible Net Assets Disclosed Intangible Assets Goodwill Undisclosed Value
IntangibleTangible
The tangible / intangible value split varies across nations
Source: 2016 BrandFinance® Global Intangible Finance Tracker (GIFT™)
13.
IntangibleTangible
The tangible / intangible value split varies across nations
Source: 2016 BrandFinance® Global Intangible Finance Tracker (GIFT™)
95%
95%
101%
105%
116%
120%
122%
123%
124%
125%
2%
3%
5%
7%
3%
4%
7%
5%
3%
2%
2%
2%
3%
1%
3%
0%
3%
1%
2%
2%
2%
-8%
-12%
-23%
-24%
-32%
-29%
-28%
-28%
-20% 0% 20% 40% 60% 80% 100%
Hong Kong
Croatia
South Korea
Romania
Russia
Macedonia
Greece
Cyprus
Mauritius
Ukraine
Tangible Net Assets Disclosed Intangible Assets Disclosed Goodwill Undisclosed Value
14.
Goodwill
Literary works
Musical works
Trademarks and Logos
Domain names
Customer contracts
Customer lists
Favourable supply contracts
IT
Databases
Technical know-how
Patents
Goodwill
Artistic
Marketing
Customer
Contract
Technology
Working
Capital
Plant &
Equipment
Land &
Buildings
Intangible assets
Tangible assets
Illustrative Examples – this is not a complete list of all possible intangibles in these classes
Understanding intangible assets
15.
Business Value Breakdown Breakdown of intangible assets for all the BRICS countries combined
2016 - USDbn
Enterprise
Value
Tangible
Net Assets
Intangible
ValueUndisclosed
Intangibles
Goodwill (10%)Technology (20%)
Contract (15%)
Customer (20%)
Marketing (35%)
Disclosed
Intangibles15,649
6,200 5,428
2,170
9,449
772
1,240
930
1,240
620
Enterprise Value Asset breakdown Intangibles(split by disclosure)
Intangibles(split by type)
Enterprise
Value
Tangible
Net Assets
Intangible
Value
16.
0.2 How to value IP assets?
17.
IP Project approach and timelineOur proposed work steps are designed to create an understanding of the IP’s contribution to
business value creation
3.2 Analysis
Identify interaction
effects
3.1 Analysis
of Guide Michelin1. Discovery & Data
Audit
2.2 IP Value Modelling
Assumptions
2.1 Quantify
IP Strength2.3 Calculate IP Value
IP Valuation Modelling
• Understanding of the market dynamics and value drivers for the Company’s IP
• Ensuring there’s enough data to conduct the valuation
• Align with stakeholders on objectives
• Data gathering
• Review of IP documentation
• Quantify the strength of the patent portfolio relative to its competitors
• This is intended to represent a ‘balanced scorecard’ of attributes that influence the strength of the IP
• IP Strength Analysis
• Appraise the company’s forecast performance
• Conduct analysis required to deliver key valuation assumptions for the model
• Forecast financials, royalty rate ranges, discount rates, growth rates…
• Bring together all data sources to quantify the financial value of the IP portfolio and their contribution to business value
• Value will be segmented by territory
• Model and findings will be presented in a report format
18.
IP approaches and methods
Approaches
Income splitMulti-period excess
earnings
Incremental cash
flow
Indirect Methods
Market ApproachCost Approach Income Approach
Price PremiumVolume PremiumRoyalty Relief
Direct Methods
19.
Brand Strength
Index (BSI)
A brand strength
benchmarking
process with a
score expressed
out of 100.
1
Brand Royalty
Rate
The BSI score is
applied to a sector
royalty rate range
to identify an
appropriate rate
2
Forecast
Revenues
The royalty rate is
applied to forecast
revenues to derive
brand revenues
3
Brand Value
Post-tax brand
revenues are
discounted to a net
present value
which equals the
brand value
4
We use royalty relief, a proven & robust brand
valuation methodology
20.
Why value ‘brands’?There are many reasons to value brands and they fall largely into two categories
Balance Sheet
Taxation Planning & Compliance
Litigation Support & Dispute Resolution
Joint Ventures
Financing
M&A
Investor Relations
Bankruptcy
Internal Management
Internal Licensing
Portfolio Management
Brand Architecture
Brand Strategy
Budget Setting
Brand Scorecards
Technical Reasons:Commercial Reasons:
21.
0.3 What do we mean by brand?
22.
What do we mean by ‘brand’?Trade marks (i.e. word mark, logo and strap line registrations), associated marketing IP
(specifically domain names, trade dress, advertising copyrights, brand guidelines and
manuals) together with the goodwill associated with those trade marks and marketing IP
• Trade Names,
• Trade Marks,
• Service Marks,
• Symbols,
• Logo
• Smells,
• Sounds,
• Slogans
• Product Design,
• Packaging Design,
• Trade Dress
• Coats of Arms,
• Certification Marks,
• Unique Accreditations
• Colours
• Websites,
• Social Media Sites,
• Publications
23.
A brand valuation helps marketers understand what a brand is worth
across different products and markets and establishes a baseline for
performance management.
The exercise involves a detailed, segmented valuation of the branded
business indicating the key drivers of value and ends with a specific asset
valuation of the brand alone.
Research and financial data is used to benchmark the subject brand is
against its peers at a segment level to assess in which areas it is strong or
weak.
This provides a greater understanding of a brand’s positioning and a planning
framework for long term strategic marketing investment.
Brand valuation underpins a value driven approach to
brand management
24.
Bra
nd
Valu
e
A brand should be viewed in the context of the business in which it
operates. This is why we always conduct a Branded Business
Valuation when doing brand valuations.
A Branded Business is the value of a single business operating under the
subject brand / trademark. This value would be equal to Enterprise Value in
case of a single branded business.
Brand Contribution captures all of the value that the brand brings to the
business. We also refer to this as “Strategic Brand Value”.
Brand Value, in Brand Finance terminology, is an accounting –based
valuation which calculates the value of the transferable element of the
brand. We also refer to this as “Trademark Value”.
The value of a brand’s contribution far exceeds the
value of the transferrable asset
®
+ Uplift
25.
Why Value Brands?Brand affects a wide range of stakeholders
Potential
Customers
Existing
Customers
Influencers
e.g. Media
Trade
Channels
Strategic
Allies &
SuppliersInvestors
Debt
providers
Sales
Production
All Other
Employees
Middle
Managers
Directors
Brand
26.
Why Value Brands?Financial impact maximised through a consideration of all brand stakeholders
Stakeholder Effects Business Value Drivers
Customers• Greater sales volumes
• Price premiumsRevenue & Costs
Suppliers• Lower prices
• Better terms
• Greater willingness to partner
Costs
Staff• Lower recruitment costs
• Lower retention costs
Recruitment Costs
Training costs
Financiers• Lower borrowing costs
• Better repayment conditions
• Higher price earnings ratio
Cost of Equity
Cost of Debt
Regulator• More invitations to tender
• Greater propensity to award
Revenue
Long term growth
Media• Influencing the attitudes of direct
stakeholdersRevenue
Public• Influencing the attitudes of direct
stakeholdersCosts of Public action B
ran
d &
Bu
sin
ess v
alu
e
Direct
Ind
ire
ct
27.
International Standards: ISO 10668‘Best Practice’ requirements for a brand valuation to be ISO compliant
Transparent
Consistent
Independent
Legal
Behavioural
Financial
Analysis Objectives
28.
World’s Most Valuable Brands 2016 – Brand FinanceRANK BRAND BRAND VALUE (USDm)
2016 2015 2016 2015
1 1 145,918 128,303
2 3 94,184 76,683
3 2 83,185 81,716
4 8 69,642 56,124
5 4 67,258 67,060
6 5 63,116 59,843
7 6 59,904 58,820
8 7 53,657 56,705
9 11 49,810 47,916
10 15 44,170 34,925
29.
Brazil’s Top 5 Most Valuable Brands 2016 – Brand Finance
RANK BRAND BRAND VALUE (USDm)
2016 2015 2016 2015
274 234 5,122 5,945
418 137 3,712 9,021
440 211 3,579 6,549
467 466 3,432 3,503
30.
Russia’s Top 5 Most Valuable Brands 2016 – Brand Finance
RANK BRAND BRAND VALUE (USDm)
2016 2015 2016 2015
205 147 6,807 8,668
230 245 5,985 5,791
299 187 4,773 6,961
437 390 3,601 3,977
31.
India’s Top 5 Most Valuable Brands 2016 – Brand Finance
RANK BRAND BRAND VALUE (USDm)
2016 2015 2016 2015
89 68 13,688 15,378
162 212 7,886 6,521
209 287 6,651 4,927
244 330 5,768 4,524
246 210 5,760 6,563
32.
China’s Top 5 Most Valuable Brands 2016 – Brand Finance
RANK BRAND BRAND VALUE (USDm)
2016 2015 2016 2015
9 11 49,810 47,916
14 22 36,334 27,459
15 27 35,394 26,417
20 37 32,264 22,714
31 46 27,735 20,392
33.
South Africa’s Top 5 Most Valuable Brands 2016 – Brand Finance
RANK BRAND BRAND VALUE (USDm)
2016 2015 2016 2015
37,002 54,027
21,970 20,029
19,761 18,232
18,922 17,506
17,386 14,396
None of the South African brands were included in our Global 500 study.
34.
0.5 Why valuation is key to brandprotection
35.
Do you know what you stand to lose? Why valuation is key for brand protection – an inbound and outbound perspective
What do internationals lose if their IP is not protected? What do local players lose if their IP is not protected ?
The above examples highlight the importance for brand owners to strategically plan and execute their trademark filling
programme early to avoid having to engage in lengthy administrative litigation for the recovery of their trademark in the
future.
British Racing Motors
36.
IP Rights and International TransferTATA – Land Rover
• Tata Motors purchased Jaguar and Land Rover from Ford Motor Company in 2008 at a price of US$2.3 billion – biggest deal in the Indian auto sector.
• Tata bought the two brands, along with their manufacturing plants and intellectual property rights – new company being called ‘Jaguar Land Rover’
• The biggest benefit for Tata Motors: the acquisition of two prestigious global brands
37.
Contact us
Brand Finance is the leading brand valuation and strategy firm,
helping companies to manage their brands for improved business results.
www.brandfinance.com
Brand Exchange
3 Birchin Lane
London, EC3V 9BW
United Kingdom
David Haigh CEO
Brand Finance plc
T. +44 20 7389 9436
38.