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Valuation in Practice

May 26, 2008

Valuations frequently underpin transactions and disputes. Whether for an acquisition, a stock market flotation or a licensing dispute, tangible and intangible asset valuations are required and carried out by experts. However, little is known about the valuation market. This exclusive research from Intangible Business sheds light on how lawyers use valuations, what they value, how important they are and how valuation providers could improve. This is the first such research into how valuations are used by legal experts.

Intellectual property (IP) often accounts for a dominant portion of business value. This research focuses on IP value within businesses, which is often an area of untapped opportunity for lawyers to improve their level of service to clients and where most contention can reside. For example, when Cadbury reported its £38m acquisition of Green & Blacks, 84% of the deal value was intangible and when PepsiCo acquired Wotsits in 2002, 82% of the purchase price was allocated to intangible assets.

Additionally, research Intangible Business conducted into how the FTSE 100 reported acquisitions in the first year under IFRS 3, which requires the break-down of all asset types, found that only 30% of the total acquisition value was represented by tangible assets. A similar study of US acquisitions between 2002 and 2007 revealed tangible assets to represent only 24% of all acquisition value. IP’s considerable value is undisputed.

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