DO YOU VALUE YOUR IP?

Most companies will have a good idea of their business (enterprise) value, but those same companies may not know the value of their Intellectual Property (IP) which underpins that business value.

Why? Because up to the end of the last century, IP was not a significant contributor to the value of a business with predominantly tangible assets like buildings, machinery, tooling, vehicle fleets and the like. Fast forward to the twenty first century and the intangible to tangible asset ratio of companies has increased significantly due to the global shift to a knowledge based and digital economy.

In short, today, the intangible asset value of a company can amount to 90% of enterprise value.

 

How does IP value work?

IP value is recorded on a company balance sheet under intangible assets, but this is based upon the cost to develop the IP (or the cost to acquire the IP asset in question). This gives an IP valuation based upon cost but not the value of the IP to the company over its useful lifetime.

What companies really need to know is the lifetime value of its IP, so that reasonable decisions on investing in assets can be made. By not knowing the IP value, a company can lose revenue opportunities and may not be aware of the return on investment in developing, protecting, and using its IP.

 

Why you should consider an IP valuation…


To maximise the value of a business that is to be acquired or sold


An IP valuation can be a great asset in attracting investor interest and securing investment capital, for example using the IP as security against an investment by reducing the investor’s risk


To establish the tax basis of the IP for spinouts (when a company moves an IP asset into a new entity) and other tax purposes


To estimate the fair value of IP for financial reporting purposes including testing assets for impairment


A valuation is needed if a company plans to negotiate a licence for their IP and so needs an estimate of potential royalties


A valuation is also helpful in determining whether an IP-based investment will yield a sufficient return


Other regulatory reasons involving enforcement or tax agencies


 

Many thanks for this detailed report. It really will be very helpful for explaining to the CT board why we are investing so much of our scarce capital into IP protection.

Mark Catchpole, Commercial Director, Conductive Transfers

 

Start the conversation about the value of your IP…

We offer a free 30-minute company brief and consultation on the principles behind IP valuation. Thereafter we will let you have a free proposal for the cost of the valuation work. To find out more, please contact IPvaluations@barkerbrettell.co.uk

To download a copy of our IP valuation costs and timeframes (approximate costs based on some typical IP valuation scenarios), please enter your name and email address below and a link will be sent to you:

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