Intangible assets such as goodwill and intellectual property assume significance during the sale and purchase of an organization. It’s a colossal part of a company’s overall value but neither does it exist in a physical form and nor is it cashable. Yet, by excluding this, one can never determine the true worth of the business. Even without any shape and form, intangible assets are of high importance for assessing the actual value of the business. So, it can be deduced that the correct assessment of the intangible asset component is directly responsible for the placement of the right price for a profitable sale. And to be able to do so, the services of a fine evaluator gather importance.
Intellectual property rights valuation or IPR Valuation is one of the most critical areas of finance that comes into play during the sale and purchase of companies and during solvency, merger, and acquisition transactions. Intellectual property is intangible assets that are either already patented or a patentable product, process, or service, or a trademark, copyright, or brand. It's the unique creation of the organization, responsible for its distinction in the market. Though intangible, it's often a major driver of success for an organization. Valuation of Intellectual Property Valuation Rights fundamentally means the process of arriving at a fair value of a Company’s Intellectual Property that can be monetized and can leverage the overall selling price of the company. For a profitable sale transaction, it’s extremely important to place the selling price at such a rate that it's sold at the best possible value. The IPR valuation process helps to achieve a part of this justifiable selling price.
Establishing the worth of IP is critical for determining sales, licensing, or transfer pricing for IP assets, and merger and acquisition (M&A) transactions. However, IP valuation is a highly complicated process. The problem of how to quote the true value to something that does not have any physical presence always prevails and also the ever-changing regulations governing IP valuation, which vary from one jurisdiction to the other, is also a massive influencing factor. IPR valuation is a specialized area and an expert or a valuation firm can only help in working out the true value of a business and capitalize on assets that one may not have been aware of possessing. Firms often invest heavily in the creation of Intellectual Property, and there's a major risk of wasted investment. This risk can be counterbalanced by high potential IP assets if they are commercialized. And thus IPR valuation firms play a crucial role here. An experienced IPR valuation firm such as Resurgent India does not only understand these changing factors but also closely studies the worth of Intellectual Properties of competitors and also keeps a track of the demand and growing popularity of the IP components.
• Income Method: This is the most common technique used in Intellectual Property valuation. In this process, the assessment is made based on the economic income expected to generate from it against the present-day value. This method is popular in scenarios where IP assets have promising cash flows and future estimation can be made based upon the cash flow generated in the past.
• Market Method: This method uses the market behaviour as a base to quote a value to the IP of a company. The price paid for the transfer of similar rights in another comparable transaction is used to influence the IP valuation of another transaction.
• Cost method: In this valuation technique, the valuation of an IP is conducted by enumerating the cost of a similar IP asset. This method comes in handy when the IP asset in question can be easily reproduced and its economic benefits cannot be easily quantified.
The objective of IP valuation is to use relevant and reliable information of industry data and market predictions on future sales. The valuation of intellectual property proves advantageous on several occasions. Determining the value of the trademark, patent and copyrights simplifies the licensing process and helps in determining appropriate royalty rates for use of intellectual property assets by others. Intellectual property protection has several positive impacts on an economy. It promotes the process, dissemination of the latest knowledge and technologies, supports innovation, promotes research and development, creates new enterprises, offers the economy location advantages, and reduces transaction costs in trade.
Intellectual property (IP) often represents one of all the biggest asset classes that a corporation holds, and unlocking its value may be a key element in any business sale. The worth of material possession like patents, trademarks, brands, databases, and trade secrets, are often valued employing several methodologies.
• Registered patents prevent competitors from launching similar, competing products and potentially pushing the business aside within the market.
• Holding the rights to a product design enables an organization to create a singular offering to their market, and price their products accordingly.
• The company’s position and profile as an innovative business are boosted.
• For design-only businesses, the license for IP, utilized by third parties to manufacture and sell their product(s), provides a major and valuable income stream.
Essentially, holding assets can increase revenue or reduce business costs, and once they generate an income for the business being sold, a variety of valuation methods will be utilized.
There is no particular method of valuation that's suitable for each business sale, however – the foremost appropriate one depends on a variety of things, including whether the intellectual property rights (IPR) are fully developed and functioning.
Several IPR valuation firm and IPR law firms operate out of Gurgaon, the country's leading commercial and IT hub. We at ResurgentIndia Limited, bring a plethora of services to your plate custom-made for your financial goals such as IPR valuation, brand valuation, and goodwill/assets impairment testing. Over the years we have mastered the art of valuation services and business valuations and coupled with market intelligence we are now one of the top preferred IPR valuation firm in Gurgaon. Intellectual Property Rights valuations is one of our key focus areas with seasoned experts deployed in our team with a pan India presence. Our offices in India are located in Gurgaon, Mumbai, Kolkata, and Bengaluru.