Wally, brands are measurable financial assets these days

Wally Olins’ recent article (Futile figures, DW 19 February) ignored the business reasons for increasing the technical robustness of brand valuations.

Brands regularly change hands, requiring brand valuations for accounting, tax and financing purposes. Global accounting standards require the valuation of all assets, including brands, following an acquisition. Every major tax authority requires the valuation of brands when they are sold off-shore, which is increasingly common. Bankers require brand valuations as loan security. Many brands created by Olins have conducted brand valuations for these reasons.

Companies need to know which brands add most value, and how value can be increased if positioning, visual identity or marketing plans are changed. Budget allocation, brand architecture and portfolio rationalisation projects depend on brand valuation analysis. Strategic consultancies, including Wolff Olins, regularly originate brand valuations for such reasons.

No one can predict the future, but it is imperative to determine a short-, medium- and long-term business case, put a value on it and subject it to ‘what if’ analysis. Share values, pension assets, property values and brands are all valued by estimating the Net Present Value of future earnings.

Brand valuations no longer come out of ‘black boxes’. The International Valuation Standards Council and the International Standards Organisation have both produced technical standards making brand valuations transparent, reproducible and auditable. Valuation opinions can be understood, discussed and challenged.

I suspect Olins’ irritation with brand valuation is a nostalgic cry for the days when brands were the playthings of design gurus, making massive decisions on a whim. Brands are now business assets with greater resources but increased financial accountability.

David Haigh, Chief executive, Brand Finance, Twickenham TW1 3PA



Latest articles