Over the last decade, intellectual properties and intangible assets have become very important to businesses. In many instances, it may comprise the largest component of value for a business. Because of their importance, these assets may require an independent valuation for transaction, licensing, tax, litigation, and strategic purposes.
Intellectual property and intangible assets have important characteristics that make them different from other business assets. These differences drive the need for more sophisticated valuation expertise. Additionally, there is no single approach that can produce a reliable result in IP valuations and rules-of-thumb and not-so-comparable comparables will not suffice. To value these assets, a valuation expert must have a strong background in financial modeling and economics in order to properly apply the financial approaches and identify truly comparable royalty and transaction rates.
Approach to Intellectual Property and Intangible Asset Valuation
- Prices negotiated for the sale of similar or comparable IP assets;
- Royalties negotiated for the license of similar or comparable IP rights;
- Values developed through financial modeling and statistical analysis of management projections and expectations;
- Damages awarded by courts in infringement litigation relating to similar or comparable IP rights; and
- Valuations for similar of comparable IP assets presented by reputable sources in the trade press and/or academic journal articles.
The Types of Intellectual Property & Intangible Assets That Can Be Valued
| Customer Lists Computer Software Contracts Copyrights Databases Distribution Networks Employment Contracts Favorable Leases Franchise Agreements Know-How Loan Portfolios Location Value Management Contracts Medical Charts and Records Non-Compete Agreements Options, Warrants, Grants & Rights Patent Applications Patents (Product and Process) Permits Prescription Drug Files |
Prizes and Awards Procedure Manuals Product Designs Production Backlogs Proposals Outstanding Proprietary Processes Proprietary Products Proprietary Technology Publications Retail Shelf Space Royalty Agreements Securities Portfolios Shareholder Agreements Subscription Lists Trade Secrets Trained and Assembled Workforce Trademarks Trade names Training Manuals |
Types of Intellectual Property and Intangible Asset Valuation Engagements
- Purchase Price Allocation – identifies assets – both tangible and intangible – and allocates value appropriately to these assets in order to establish the acquiring firm’s associated basis, depreciation and amortization.
- Estate and Gift Valuation – valuations that meet the requirements of Revenue Ruling 59-60 for intangible assets that are included in an estate for federal gift and estate tax purposes.
- Charitable Contribution – independent valuation for intangible asset contributions of assets valued at more than $5,000 per Section 170 of the Internal Revenue Code.
- Royalty Rate Study – defines the appropriate royalty rate to charge or to pay for a specific use of an asset.
- Transaction Negotiations – defines the value of the asset to your organization as well as to the potential acquirer. We provide a range of prices and the key points for negotiating your deal.
- Fairness Opinion – provides an independent assessment and opinion as to the fairness of a proposed offer. Generally used by management and the board of directors in their fiduciary capacity as an indication that they have fulfilled their fiduciary liabilities.
- Equity Allocation – valuations of contributed intellectual property or intangible assets that provide a basis for the allocation of equity within a business, partnership, or joint venture.
- Infringement Damages – quantifying economic damages related to copyright, trademark or other intellectual property infringement, breach of license or breach of a contract.