FITT (Fostering Interregional Exchange in ICT Technology Transfer)
Process “Valuation” in general
Valuation is an essential process in order to achieve the optimal exploitation of protected IP assets.
Valuation, as a process, consists in choosing one or several dedicated methods in order to assess the value of an asset.
A value is not a price. Value is subjective, in the sense that value can differ depending on the direct environment, whereas a price is an objective information.
Process “Valuation” in general
In the activity of IP Management, valuation is perceived as a technology and business focused activity.
(see activity “IP Management” for more details about this triangulation)
VALUATION EXPLOITATION PROTECTION Business Legal Technology IP Management
TTOs and valuation – Why?
Reasons to conduct valuation activities are diverse :
Company valuation Taxation planning External reporting IP sale & licence Accounting IP exploitation & management Capital Raise Dispute resolution/Litigation support Internal management & Strategy
Quantitative Valuation Approaches
There are 3 major types of valuation approaches
Mesures the value of an intangible asset based on what purchasers on the market would have paid for a reasonnably similar asset
Mesures the value of an intangible asset by taking into account all of the costs invested in the intangible asset (building, replacement and/or reproduction costs)
Mesures the value of an intangible asset by reference to the Net Present Value (NPV) of the expected benefits over the remaining life of the asset
Value is determined using market-observable multiples
Parametrization is based on recent market transactions for comparable assets
Multiples are based on
Sales, Profit Margins, …
Historic purchase price Observed sales x3 Price are converted into multiples of earning Forecasted sales Derived purchased price x3 From price (observed) to value (estimated) Value
Cost Approach can be based on historic and/or replacement costs
Historic costs t Inflation-ajusted costs/periods Value
Based on the actualized net present value of future cash-flows
Period 1 Period 2 Period 3 Period 4 t Present Value Sum of future Cash Flows = Value
Parts of the process
In the framework of the FITT project, valuation process is apprehended through practices and cases
« Valuation Methods » exposes the nature of the various quantitative valuation approaches within a global practice
« Cost Approach » details a case dedicated to a trended historical cost approach to valuation
« A valuation tool » exposes a specific tool developped internally at Tudor which simplifies quantitative valuation procedures
Practice « Valuation methods »
Quantitative valuation methods can be regouped in 3 categories
Each have their own benefits and drawbacks, which are detailed in the practice
Case « Cost Approach »
This case is based on a real-world experience dedicated to estimate the value of an IP asset composed of a patent portfolio
Methodology exposed in the case details how to conduct a trended historical cost approach, based on a 6 steps procedure
Case « Valuation Tool »
A valuation tool was developped internally at Tudor in order to facilitate valuation excercises
This tool assists not only the valuation activity for all quantitative valuation approaches exposed in previous practice, but also helps the TT officer choosing among valuation methods based on the nature of available information
The tool is presented in this case, alongside the major hypothesis that were used in order to develop it