Karen Harverson
Brands, though intangible, are often the most=20 valuable asset of a company, more so than its real=20 estate, equipment, stock, investments and=20 technology.
“A brand has an economic value because of the=20 relationship that it creates between the supplier=20 and the customer,” says Raymond Perrier, executive=20 director of Interbrand, a specialist in the area of=20 brand and corporate name development.
It can be sold or bought separately from the=20 company itself, or in many cases companies are=20 acquired largely because of the brand rather than=20 its tangible assets, he says.
Brands are increasingly representative of the=20 corporate worth of a company. In the eighties, 80=20 percent of the price paid for a company was matched=20 to its tangible assets whereas this ratio has now=20 reversed.=20
“For example, the corporate value of Coca-Cola may=20 be $56-billion but its tangible assets may only=20 amount to some $4-billion,” says Perrier.
One of the reasons for evaluating a brand is its=20 use during an acquisition or merger. “Rather than=20 trying to write off the sometimes large difference=20 between the price paid for a company and its=20 tangible assets to `goodwill’, many companies now=20 choose to place a value on a brand and list it on=20 the balance sheet as an asset.”
Perrier adds that placing a value on a brand is=20 useful during joint ventures where one partner may=20 be bringing in finance or technology and the other=20 a brand name.
The role of the brand, says Perrier, has changed=20 from identifying the supplier to informing and=20 reassuring the customer. “With the cross licensing=20 of technology, the quality and product offered by=20 companies can be virtually identical and it’s only=20 the brand which differentiates one from the other.”
Perrier determines the value of a brand not by how=20 much a company would get if it sold the brand, or=20 by the cost spent on developing that brand, but on=20 the value the company acquires by keeping it.
“Very often, the premium price a brand can command=20 is not indicative of its value, instead, its value=20 is determined by how much more the business is=20 worth because it owns the brand.”