Trademark valuation
Trademark valuation - a long-time experience and professionalism
We provide professional support in the process of valuing the trademarks.
Trademarks usually constitute the most valuable components of intangible assets of enterprises and companies. According to the Industrial Property Law, a trademark can be any sign that makes it possible to distinguish the goods of one enterprise from those of another enterprise, and that can be presented in the trademark register in a way that makes it possible to determine the unambiguous and precise subject of the protection granted. A trademark, in particular, can be a word, including a name, a drawing, a letter, a number, a color, a spatial form, including the shape of goods or packaging, as well as a sound.
Trademarks are assets that are critical to the operational activities of companies. Regular trademark valuations support effective management of intangible assets and foster sound strategic decision-making. Trademarks not only affect a company's brand recognition, but also have a direct impact on the value of the entire enterprise.
In business life, trademarks are usually divided into:
- business trademarks - which directly designate a particular business entity and only indirectly its products, goods and/or services,
- product trademarks - which relate directly to a particular product and/or service or closely related products and/or services.
Trademark valuation is a process that is carried out for a variety of purposes of significant importance to businesses:
- Determining the value of a trademark may be necessary when selling it. Valuing a trademark provides better negotiating leverage and can lead to favorable transaction terms.
- The valuation of a trademark can be carried out in the context of licensing process. A correctly estimated value gives a better basis for negotiating the terms of a license agreement, which can help increase the company's revenue.
- Trademark appraisal is also recommended in the case of bringing a trademark as an in-kind contribution to a company. A professional trademark valuation should ensure that a proper and equitable ownership structure is formed after the trademark is transferred to the company.
- An equally important reason for carrying out a valuation is to establish a security over it in the process of obtaining a loan. Banks require professional appraisals of the value of assets to assess the risks of providing financing.
Performing a trademark valuation is also required in the process of conducting Purchase Price Allocation - identifying and estimating the fair value of acquired assets - tangible and intangible, including trademarks - for final disclosure on the acquirer's balance sheet.
Trademarks, like all intangible assets, are valued using the market (comparative), cost and income methods.
- In the market methods, the value of a trademark is estimated on the basis of comparable market sales transactions. Most often, direct application of this method in practice is severely hampered by the lack of access to transactional data of sales of similar trademarks. At the same time, it is possible to apply this method by relying on estimates of the value of trademarks in purchase price allocation (PPA) processes following a company or enterprise acquisition transaction.
- For the cost approach, the value of trademarks is estimated as the cost required to re-produce or reproduce the item being valued.
- In income methods, which are the most common trademark valuation techniques, the process of estimating value takes into account potential revenues, expenses, profitability and capital expenditures associated with the use of a trademark. These methods estimate value as the present or capitalized value of future net cash flows, revenues or saved costs over the economic life of trademarks. Income methods can take different forms given the specifics of the trademark itself to be valued and the purpose of the valuation.
The most commonly used income methods in the trademark valuation process are:
- Relief from royalty method,
- Cost savings method,
- Multi-period excess earnings method (MPEEM),
- With and without method.
In the process of valuing a trademark using the income approach, we consider taking into account tax savings relating to the tax depreciation of a trademark (tax amortization benefit - TAB).
