Ocean Tomo, a part of J.S. Held, Managing Director Gregory Campanella spoke on the topic of brand valuation and monetization at a webinar hosted by the Licensing Executive Society’s Valuation and Pricing Committee.
Ocean Tomo will be publishing to the Insights blog a series recapping the webinar, and Greg’s answers to a multitude of questions from the panel moderator on topics such as: defining a brand, understanding brand valuation methodology, the common reasons to perform brand valuations, and how brand value can exist without marketing or R&D budgets.
Part 2: Brand Valuation Methodology
Gregory Campanella explores Brand Valuation Methodology and how to understand the different aspects within it. Greg explained that the methodologies used to value a particular brand may differ depending on the purpose of the analysis. For this reason, it is important to consider the context of the valuation.
The COVID-19 pandemic left many businesses scrambling for liquidity; and to access that liquidity, managers looked to their balance sheets for value. For many, the value was found in assets not historically pledged as collateral; and assets such as brands were quickly established as the foundation of corporate liquidity efforts. Even after COVID, many retailers and those in the hospitality industry continued to suffer from the ongoing malaise of state-mandated lockdowns, resulting in lower traffic, and sales. Many of these businesses turned to Ocean Tomo to provide the valuations they needed to support their fundraising efforts.
During the panel, Greg recounted his experience with a client of Ocean Tomo that was looking to raise additional debt financing. The business’ core assets had already been pledged as collateral, but there was flexibility in the existing debt covenants that allowed the client to transfer assets with a value below a certain pre-determined value out of the company. The client needed a valuation of its intellectual property (IP) assets, including the brand, to help them extract and pledge the assets as collateral for a new loan needed to keep the business afloat.
Greg explained that, when analyzing a company that is not in distress (i.e., has not fallen into bankruptcy or is being liquidated), a discounted cash flow method, the relief of royalty, is commonly used to measure value. This method is based on the premise that the value that a business extracts from the brand can be measured as the benefit a company gets from the avoided payment of royalties for the use of that brand. In layman’s terms, the value captures the benefit of the right to use the brand name free of charge.
In order to measure the benefit derived from the use of the brand, Greg advised that the focus of the appraiser should be on brand-related revenues, i.e., the revenues that benefit from the use of the brand. Greg goes on to explain that any analysis of cash flows must also consider the expected period of benefit. Key brand assets are typically long-lived assets; and as such, it is important to understand the business’ competitive environment, strategy, and plans to manage and protect the long-term value of the asset.
It is important to analyze emerging trends in the industry because the brand value is often directly tied to the expected performance of a business, and a brand that is struggling today may still offer the potential for strong future performance.
A fantastic example of this historic performance leading to future trends can be seen in the Marvel Comics brand, a company that filed for bankruptcy in 1996, but has seen a major resurgence given the trends of blockbuster films and continued storytelling. Marvel Comics today, is one of the world’s most valuable entertainment IP portfolios, with significant brand value.
In summary, Greg explained that the value of a branded asset(s) considers not only the past successes (and failures) of the asset but also the business strategy and opportunities for future exploitation. Greg reinforced the idea that you must consider performance and profitability over the long run, not a single point in time. A supportable analysis looks beyond the brand today, it considers the expectations for the brand, industry, and profitability going forward.
For further insights on a practical and actionable understanding of the drivers of brand value along with a comprehensive approach to understanding the linkages between your brand and its value, download the Ocean Tomo Brand Report at: https://www.oceantomo.com/media-center-item/brand-report/
Gregory Campanella is responsible for leading the Management Services Group and is the Managing Director in the Valuation practice of Ocean Tomo, a part of J.S. Held. Mr. Campanella’s work has focused on valuations of intangible, IP, and tangible assets for acquisitions and divestitures, bankruptcy and restructuring, the establishment of monetization strategies including licensing, mergers and joint venture/partnership formations, litigation support, and financial reporting and tax matters.
Mr. Campanella also has experience performing business enterprise, equity, and debt valuations. Industries in which he has experience include telecom, computer hardware, and software, entertainment, semiconductors, life sciences/pharmaceuticals, wireless and wired communication, and e-commerce, among others.
Prior to Ocean Tomo, Mr. Campanella led cross-functional teams providing valuation, financial analysis, strategic consulting, and transaction advisory services to consumer products and technology companies in conjunction with IP and enterprise acquisition, investments, and divestitures. Mr. Campanella is skilled in the creation of models to both evaluate the economics of alternative spin-out strategies and to establish the value of IP to be contributed in a joint venture.
Mr. Campanella is a member of the Intellectual Property Owners (IPO) and the Illinois Technology Association (ITA). He is a graduate of the University of California with a BA in Economics; received his JD from Loyola University of Chicago School of Law and an MBA from the University of Southern California Graduate School of Business.
To explore this topic and how it could impact your business, please contact Gregory Campanella at +1 415 946 2605 or email@example.com.