Comparables and Valuation: the role of intangibles in setting a market price

I  made the case earlier this month that corporate values are largely intangible today and that you can influence the value placed on your company by the market by sharing information on your intangibles.

What I haven’t discussed is the role of “comparables” in the valuation process.

Comparables are transactions for similar companies. The tell you the price and basic data from M&A for companies of similar size and business model in your industry. Seeing the price that other companies go for gives a good feeling for the overall market for businesses like yours.

But when you dig into the data, you’ll find a huge variation in results. There are often companies that have sold for as little as 2-3 times EBITDA. And others that have traded for numbers as high as 14-15 times EBITDA. The natural first inclination is to assume that your company is in the top category, Read more

On the Value of Intangibles (and why that’s the wrong question)

The measurement of intangibles tends to create a lot of confusion. That’s because there are a number of ways of measuring them and they all get jumbled together. If you look at my last post on intangibles spending, you’ll see a real mixture of metrics. Some of Nakamura’s estimates looked at categories of “spending.” But in the case of M&A data, “cost” data for acquired intangibles on the balance sheet (which sounds a lot like spending) is really derived from “valuations” of individual assets (we’ll explain this below). Stock market data would be considered “valuation” data because it is extracted from the total corporate value placed on the company by the stock market. You can see that value and cost get mixed together a lot of the time. This leads to a lot of confusion. We’ll try to break down the concepts of value here and then tell you why we don’t think value is the right question for managers most of the time. Read more

Five Reasons to Focus on Optimizing Intangibles in 2010

I am more and more convinced that 2010 will be the year of intangibles, intangible assets, intangible capital, intellectual capital, knowledge assets or whatever else you want to call them. There are five big reasons why:

1. Intangibles already get the majority of your  investment dollars. Estimates are that at least 60% of the money organizations invest in their future productive capacity is in intangibles. If you are already spending money, isn’t time you created a way to track intangibles performance? Read more

Shedding Light on the Value and Performance of Intangible Capital

The first thing that most people ask when discussing intangibles is value. My answer is, “how can you value something for which you have no data?”

I do not mean to imply that it is impossible to develop data on your intangible capital. It’s just that most companies have not taken the necessary steps to accomplish this. How can you create a sound data set on your intangibles? Read more

The Stock Market is Not the Best Way to Value Intangibles

In the Value Networks discussion group here, someone recently asked the question about the value of intangibles now that the stock market has declined so precipitously. Many of us in the field have used the shorthand formula: market cap – tangible book value = intangibles.

This got me started and I posted the following answer. Most of these themes have been explored in previous posts but this one pulls a lot of it together… Read more