Brand Values and Valuation in Current Economic Downturn


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Brand Values and Valuation in Current Economic Downturn

  1. 1. Brand Values and Valuation in the Current Economic Downturn IP Business Congress Chicago, Illinois June 21-23, 2009 Presented by: Weston Anson, Chairman CONSOR Intellectual Asset Management [email_address]
  2. 2. Market Trends: IP Specific Increasingly, valuable IP assets used as a financing vehicle Mergers and strategic alliances based on IP assets Leveraging the full bundle of IP rights Unused brand value as a source of working capital Accurate valuation of brands and IP grows in importance Global awareness of market value of IP / IT Financial reorganization impacts brand values
  3. 3. Brand Value Issues Deteriorating economic conditions Retail turmoil and consolidation Consumer indifference WalMart-ism Manufacturer consolidation Shifting social values Quicker cycles, shorter lives House brands and other constraints Private label / store label growth
  4. 4. New Issue: Bankruptcy Mervyns Goody’s Gottschalk KB Toys Circuit City Linens ‘N Things Fortunoff GM Chrysler Tower
  5. 5. Bundles of Intangible Assets Formulae Data warehouses Marketing umbrella Packaging technology and sources Master licenses Sub-brand names Shapes and sizes Source code Core brand Process technology Databases Worldwide trademark registration Design technology Data mining Copyrights Proprietary test results Domain names / URLs Secondary trademarks Plant and production design e-Commerce sites Packaging design and copyrights Product specifications Third party software tools Trade dress Operating platforms Credit/payment systems Characters Trade secrets Custom applications Corporate name and logo Key patents Enterprise solutions Primary trademark Technical Bundle IT Bundle Brand / Marketing Bundle
  6. 6. Case Study – Tower Records Inventory and investigative audit Logical groupings Triage Benchmark valuation Context specific Going concern value v. liquidation discount Identify potential buyers / influencers Domestic International Market assets / close transactions Brokers E-commerce listings End users
  7. 7. Who Cares About Maximizing IP Value? Merger and Acquisition Interests Shareholders Tax Authorities Auditors Wall Street Analysts Other Stakeholders Internal Asset Managers Partners International Affiliates The Media Finders of Fact
  8. 8. Value Maximization Alternatives Licensing Auction Sale Collateralization Securitization Competitive Disposition IP Holding Companies Joint Venture
  9. 9. Value is Context Specific Valuation is context specific and time critical Going concern Reorganization Orderly disposal Liquidation CONTEXT + TIME = VALUE
  10. 10. Context Continuum™ A simple graph that illustrates what the CONSOR “Context Continuum” is. In the most basic of terms, it is a projection of relative values of a piece of intellectual property, measured along two dimensions: The vertical scale establishes the conditions under which the asset is being disposed, such as liquidation, fire sale, orderly disposal, reorganization or going concern. The horizontal scale measures time in monthly increments.
  11. 11. Traditional Valuation Methods Market Approach Sales of comparable assets Cost Approach Cost to develop to current status Income Approach Projection of revenue / income attributable to the IP Price Premium Relief from Royalty Technology Factor
  12. 12. Going Concern v. Disposal or Liquidation 1.7% 1.0MM 60MM Linens ‘N Things 6.5% 2.6MM 40MM Tower Records 23.2% 232MM 1.0B Marvel 5.0% >250K 5.0+MM Amherst Fiber Optics 11.4% Average 14% 14MM 100MM Circuit City 14.7% 31MM 210MM Boston Market 15.0% 60 MM 400MM+ Polaroid Proportion Disposal or Liquidation Going Concern Value Case
  13. 13. Case Study - Budget Group, Inc. Relief from Royalty Concept of Value: Comparable sales Discounted royalty rates Approach: Loan Securitization / Sale of company Cause: Core trademark Franchise rights Reservation system Customer databases Airport concession rights Components: Bankruptcy Context: Budget Group, Inc. Company:
  14. 14. Case Study - Budget Group, Inc. IP Valuation Summary $ 70,949,000 – 97,308,000 $ 466,488,000 – 479,392,000 TOTAL VALUE 729,000 – 2,912,000 3,645,000 – 5,823,000 Mailing List and Database 0 7,177,000 – 17,943,000 Airport Concession Rights 1,927,000 – 5,780,000 38,535,000 Reservation System (Global) 938,000 – 1,407,000 9,377,000 Ryder Truck License 5,280,000 – 7,920,000 44,002,000 Franchise Rights (International) 6,789,000 – 10,183,000 56,571,000 Budget Trademark (International) 6,870,000 – 8,587,000 38,166,000 Franchise Rights (North America) $ 48,416,000 – 60,519,000 $ 268,975,000 Budget Trademark (North America) Liquidation Value Going-Concern Value Description
  15. 15. Value Extraction Strategies Disposition Liquefaction Leverage
  16. 16. Disposition Auction Sale Competitive Disposition Merger & Acquisition
  17. 17. Liquefaction Collateralization Securitization IP Holding Company
  18. 18. Leverage Traditional Licensing Other Licensing Models Joint Venture
  19. 19. Licensing Issues Lower RRs Smaller guarantees Less upfront More renegotiations Much wider range of RRs (TMs = 2-12%) More flexibility in marketing contributions Shorter term
  20. 20. Licensing Royalty Rates There is no typical royalty rate. The most frequent rate is 5% 39% of agreements are for less 42% of agreements are for more. Source:
  21. 21. Value Maximization Case Studies Circuit City, Tower Records Auction Chiquita Brands Holding Company Dunkin Brands, Gloria Vanderbilt Securitization Polaroid, Delphi Collateralization Collins & Aikman, Jenny Craig Sale IBM, Kmart Licensing
  22. 22. Five Critical Elements of Value Maximization 1. Know where maximum strategic and realizable value is to be found in the asset portfolio 2. Establish a realistic current market value for the assets 3. Understand how to extract maximum value from the assets 4. Select the best possible intellectual property / intangible asset strategy for the situation 5. Manage the process
  23. 23. Brand Valhalla Elevator Chesterfield Escalator Blatz Cellophane Oldsmobile Dodge Pan Am