Brand Valuation: Approaches, Methods, and evaluations

Introduction: The Brand as a Strategic Asset at the Heart of Value Creation

Today, the brand constitutes one of the most powerful—and paradoxically most misunderstood—assets in the contemporary economy. In many sectors, a company's value no longer resides solely in its tangible assets or production capabilities, but in its ability to build a lasting preference with its customers. From a legal perspective, it constitutes a protected distinctive sign (Art. L711-1 French IP Code; Art. 1 Swiss TmPA SR 232.11). It is also an economic asset once it is identifiable, controlled, and capable of generating future economic benefits, falling within the scope of intangible assets as defined by IAS 38.

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Origin of Brand Valuation: From Legal Protection to Financial Recognition

Brand valuation is the result of a progressive evolution at the intersection of intellectual property law, accounting, and corporate finance. IFRS 3 on business combinations requires separate recognition of identifiable intangible assets including brands. The OECD Transfer Pricing Guidelines impose the arm's length principle for intra-group brand exploitation. This evolution marks a major conceptual break: the brand is no longer just an element of reputation integrated into global goodwill, but a distinct asset capable of being valued individually.

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Legal and Financial Definition of the Brand (French and Swiss Law)

In French law, Article L711-1 of the Intellectual Property Code defines the brand as a sign used to distinguish the products or services of a natural or legal person from those of other persons. In Swiss law, Article 1 of the Federal Act on the Protection of Trade Marks (TmPA, SR 232.11) defines the brand as a sign capable of distinguishing the products or services of one enterprise from those of other enterprises. Financially, IAS 38 defines an intangible asset as identifiable, controlled, and capable of generating future economic benefits.

How to Protect Your Brand in French and Swiss Law

In France, protection stems from registration with the INPI. In Switzerland, registration with the IPI is required. In both systems: (1) the sign must possess a distinctive character; (2) a prior art search is necessary before filing; (3) the brand must be actively used (obligation of use after 5 years); (4) the brand must be actively defended against infringement. A legally fragile brand cannot support the same economic value as a solidly protected right.

Why Protect Your Brand?

Protecting your brand is a strategic decision that: (1) secures an exploitation monopoly; (2) preserves economic and proprietary value; (3) secures marketing and commercial investments; (4) controls litigation risk; (5) strengthens credibility with partners and investors. Protection constitutes the indispensable prerequisite for any consistent financial valuation process.

Why Evaluate or Value a Brand?

Evaluating a brand occurs in specific contexts: (1) mergers and acquisitions — IFRS 3 Purchase Price Allocation (PPA); (2) establishment of license agreements; (3) impairment tests; (4) litigation and disputes; (5) proprietary strategy and governance. Beyond these specific contexts, a brand influences the company's ability to generate future flows by commanding premium pricing, increasing customer loyalty, or reducing acquisition costs. In this framework, brand evaluation is often part of a more global company valuation process.

In Which Contexts Should a Brand Be Valuated?

In France: M&A transactions, contributions in kind (commissaire aux apports), license/franchise agreements, litigation, and impairment tests. In Switzerland: corporate transactions, intra-group restructuring (ESTV/AFC arm's length principle), contributions in kind (Swiss Code of Obligations), litigation, and fundraising/governance contexts.

How to Value a Brand: Valuation Methods

International standards (IVS 210, ISO 10668) identify three main approaches:

1. Cost Approach: Historical cost method (accumulates actual development expenses) and Replacement/Reconstitution Cost method (today's equivalent investment).

2. Market Approach: Comparable Transactions method based on brand sales in similar market conditions.

3. Income Approach: Relief from Royalty method (estimates royalties saved from owning the brand, then discounted); DCF applied to the brand (isolates cash flows specifically attributable to the brand); Excess Earnings method (subtracts normal remuneration of other contributing assets).

Example of Brand Evaluation

Premium consumer goods company. Revenue: 20M; margin 12%; tax 25%; growth 2%; discount rate 11%. Historical cost: 2.7M. Reconstitution cost: 3.15M. Transaction comparables (0.18x revenue): 3.6M. Relief from Royalty (2% royalty rate): 300,000/(11%-2%) = 3.33M.

Royalty Rates and Comparable Transactions

CEO Message

Evaluating a brand does not consist of measuring a subjective perception nor valuing a simple graphic sign. A brand is a right. But above all, it is an economic capacity. A brand only has value if it allows for generating excess margins, increasing sales volume, reducing acquisition costs, and stabilizing demand over time. In other words, its worth is the flows it secures. The goal is not to get a high number. The goal is to get a consistent, defensible, structured number, compatible with international standards and the company's economic reality. The brand is a strategic asset. But like any strategic asset, it must be analyzed with discipline.

Conclusion: The Brand, from a Distinctive Sign to a Structured Financial Asset

Legal protection constitutes the foundation of value. Evaluation occurs in precise contexts (M&A, restructuring, licensing, tax). Cost, market, and income approaches pursue a common goal: attributing flows to a right. The value of a brand depends not on what it represents symbolically, but on what it allows economically. It is not declared | It is demonstrated. The value of an asset corresponds to the discounted value of the flows it generates.

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Author

Aristide Ruot, Ph.D — Founder | Managing Director