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Newsletter - Trademark statistics and case study
 
 
This newsletter covers trademark related statistics derived from purchase price allocation (“PPA”) studies. Trademark value in relation to other assets is discussed. Also, statistics on economic useful life of trademarks is shared. Finally, we discuss a case study on the use of ratios derived from PPA data for valuation purposes.
 
 
Trademarks in PPA studies
 
     
Trademarks related intangibles appear 2,272 times in the PPAnalyser database. This represents 33% of the total amount of PPAs recorded in the database. After customer relationships, trademarks is the most frequently identified intangible asset included in PPA studies. The average trademark value compared to total assets is 6.5%. This ratio varies per industry. The graph illustrates the percentage per industry. The highest percentage is observed in the Retail Trade industry and the lowest percentage is observed in the Service industry.
 
 
Economic useful lives of trademarks
 
 
The economic useful life of trademarks is disclosed in 1,760 records of the PPAnalyser database. This represents 52% of the total amount of economic useful life records. The economic useful life of trademarks is most frequently disclosed after customer relationships and ahead of technology related intangibles. Of all disclosures, 26% of the trademarks have an indefinite useful life. Of the definite useful life trademarks, the median economic useful life is 6 years. The median varies per industry as illustrated in the graph. The highest economic useful life for Trademarks is observed in the Manufacturing industry and the lowest economic useful life is observed in the Service industry.
 
 
Case study - Intercompany transfer of shares of a local distribution company
 
Salesco is a distributor of a large multinational (“Multico”). Its activities are limited to the distribution of Multico’s products in the local market. Salesco is remunerated based on an arm’s length operating margin that is similar to an independent distributor. Its shares are owned by a Finish holding company. As part a legal restructuring the shares are transferred to a Dutch holding company.

In contrary to a third party distributor, Salesco relies on a single distribution agreement (from Multico). Also, marketing expenses are to a large extent incurred by Multico. In the event of a termination of the distribution agreement, it is unlikely Salesco would survive.

A standard DCF results in a fair market value assuming profitability of an independent distributor. To reflect Salesco’s lack of customer related intangibles, a necessary adjustment has to be applied. The value of customer related intangibles owned by independent distributors are estimated through the use of PPAnalyser. A customer-related-intangibles-to-purchase-price ratio of 23% is determined, derived from PPA studies of independent distributors. This ratio is applied as an adjustment to the outcome of the DCF analysis.

 
 
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sales@ppanalyser.com

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