Description
This presentation is about valuation of a brand and it covers topics like status symbol, brand transfers, Replacement Cost Method, Interbrand Method , DCF Approach, Damodaran’s Approach, Real Options Approach
? Information asymmetry
? Emotional value, status symbol, etc
What is the Value of this Used Car?
Price Rs.80K
Car in Good Condition Car Car in Bad Condition Price Rs.40K
? Headache Remedies
? Toothpaste
? Corn Flakes ? Ketchup
? Soup
? Skimmed Milk Powder???
? Expensive Watches
? Fashion Products ? Expensive Cars
? Club Membership
? Coke/Pepsi??
? Brand Management and Development
? Mergers and Acquisitions
? RHM (Ranks Hovis McDougall) first company to have
valued a brand
? Balance Sheet Reporting ? Peer Pressure???
Valuing a Brand
? For Whom?
? The Owner
? Some other company
? For What Purpose?
? For Sale ? Collect a Series of Royalties ? Brand Management ? Capitalize it
? Colgate took over Cibaca brand for Rs.40.83 crores.
The total value of the oral care division of Hindustan Ciba Geigy was Rs.131 crores. ? HLL took over Lakme brand for Rs.78 crores. The total value of Lakme was Rs.140.4 crores. ? International Best Foods acquired the Captain Cook brand name from DCW Home Products for a consideration of Rs.45.52 crores. The total value of the division was Rs.78.49 crores.
? The price of International Best Foods increased by
Rs.100 after the announcement that it is buying Captain Cook. ? The price of Smithkline Beecham increased in Jan 96 when it acquired the famous Crocin Brand from Duphar Interfran for Rs.47 crores.
? Replacement Cost Method
? Interbrand Method ( most popular)
? DCF Approach ( popular) ? Damodaran’s Approach
? Real Options Approach
? Present Value of Historic Investment in Marketing and
Promotions ? Estimation of Advertisement Required to Achieve the Present Value of Brand Recognition
DISCOUNTING CASH FLOW (DCF) METHOD To calculate : 1. Brand earnings –from future cash f lows 2. Brand earnings at constant money 3. Discount rate/factor – from risk/interest rate 4. Brand value
DISCOUNTING CASH FLOW (DCF) METHOD Steps 1. Calculate the brand earning for the future years( say 10 years) by deducting charges for capital employed ,tax payable etc. 2. Adjust for inf lation for all years from Year 1 to Year 10. 3. Te result of the above is Brand earning constant money for each year.
4. Fix a base discount rate. This discount rate usually ref lects the brand strength, in terms of ‘riskiness’ or the bank interest rate.
5.
Find out the discount factor for each year which is a multiple of the base discount rate ( multiplied that much no. of times)for the corresponding year.
6. Calculate the discounted cash f low for each year ie. DCF = Brand earning / discount factor. 7. Add all the discounting cash f lows of all the 10 years. That will give the NPV of cash f low to 10 years. This will be the brand value considering the cash f low for the next 10 years. 8. It can also be calculated for period infinity. End.
doc_627636918.ppt
This presentation is about valuation of a brand and it covers topics like status symbol, brand transfers, Replacement Cost Method, Interbrand Method , DCF Approach, Damodaran’s Approach, Real Options Approach
? Information asymmetry
? Emotional value, status symbol, etc
What is the Value of this Used Car?
Price Rs.80K
Car in Good Condition Car Car in Bad Condition Price Rs.40K
? Headache Remedies
? Toothpaste
? Corn Flakes ? Ketchup
? Soup
? Skimmed Milk Powder???
? Expensive Watches
? Fashion Products ? Expensive Cars
? Club Membership
? Coke/Pepsi??
? Brand Management and Development
? Mergers and Acquisitions
? RHM (Ranks Hovis McDougall) first company to have
valued a brand
? Balance Sheet Reporting ? Peer Pressure???
Valuing a Brand
? For Whom?
? The Owner
? Some other company
? For What Purpose?
? For Sale ? Collect a Series of Royalties ? Brand Management ? Capitalize it
? Colgate took over Cibaca brand for Rs.40.83 crores.
The total value of the oral care division of Hindustan Ciba Geigy was Rs.131 crores. ? HLL took over Lakme brand for Rs.78 crores. The total value of Lakme was Rs.140.4 crores. ? International Best Foods acquired the Captain Cook brand name from DCW Home Products for a consideration of Rs.45.52 crores. The total value of the division was Rs.78.49 crores.
? The price of International Best Foods increased by
Rs.100 after the announcement that it is buying Captain Cook. ? The price of Smithkline Beecham increased in Jan 96 when it acquired the famous Crocin Brand from Duphar Interfran for Rs.47 crores.
? Replacement Cost Method
? Interbrand Method ( most popular)
? DCF Approach ( popular) ? Damodaran’s Approach
? Real Options Approach
? Present Value of Historic Investment in Marketing and
Promotions ? Estimation of Advertisement Required to Achieve the Present Value of Brand Recognition
DISCOUNTING CASH FLOW (DCF) METHOD To calculate : 1. Brand earnings –from future cash f lows 2. Brand earnings at constant money 3. Discount rate/factor – from risk/interest rate 4. Brand value
DISCOUNTING CASH FLOW (DCF) METHOD Steps 1. Calculate the brand earning for the future years( say 10 years) by deducting charges for capital employed ,tax payable etc. 2. Adjust for inf lation for all years from Year 1 to Year 10. 3. Te result of the above is Brand earning constant money for each year.
4. Fix a base discount rate. This discount rate usually ref lects the brand strength, in terms of ‘riskiness’ or the bank interest rate.
5.
Find out the discount factor for each year which is a multiple of the base discount rate ( multiplied that much no. of times)for the corresponding year.
6. Calculate the discounted cash f low for each year ie. DCF = Brand earning / discount factor. 7. Add all the discounting cash f lows of all the 10 years. That will give the NPV of cash f low to 10 years. This will be the brand value considering the cash f low for the next 10 years. 8. It can also be calculated for period infinity. End.
doc_627636918.ppt