BRAND VALUATION

METHODS

EUROPE'S INDEPENDENT BRAND VALUATION EXPERTS

 Table of Content

1. European Brand Institute ................................................................................................... 1

1.1 Importance of Brands ................................................................................................... 1

1.1.1 Brand as an Asset ................................................................................................. 2

1.1.2 Impact of the Brand Value on the Enterprise Value ............................................... 2

1.1.3 Brand Value as a Target Parameter ...................................................................... 2

1.2 Principles of our work ................................................................................................... 3

1.3 Brand valuation in general ........................................................................................... 4

1.3.1 Bases of Valuation................................................................................................. 5

1.3.2 Certified Brand ...................................................................................................... 6

1.4 Monetary Brand Valuation ............................................................................................ 7

1.4.1 Valuation method................................................................................................... 7

1.4.2 Validation and plausibility check of the results ......................................................12

2. European Brand Institute - Studies ...................................................................................14

2.1 Brand selection criteria................................................................................................14

2.1.1 Brand companies..................................................................................................14

2.1.2 Brand corporations and single brands – the European way ..................................14

2.1.3 Significant brands .................................................................................................15

2.1.4 Private and listed companies with publicly available information...........................15

2.2 The Study Methodology ..............................................................................................15

Step 1: Brand Strength analysis ....................................................................................15

Step 2: Financial analysis ..............................................................................................16

Step 3: Determination of brand-specific cash flows BCF / capitalization interest rate Z .16

Step 4: Calculation of brand values ...............................................................................17

Step 5: Plausibility check of the results ..........................................................................17

Step 6: Analyses of sectors, countries and macroeconomics ........................................17

3. European Brand Institute - Facts ......................................................................................18

1. European Brand Institute

1.1 Importance of Brands

In the context of value-oriented management, it is necessary to conceptualise the influence and

performance of brands under consideration of multiple aspects.

The importance of brands has diverse impacts in everyday life and in business management.
They offer, for example, following benefits:

- A brand is a distinctive future. In markets with increasingly interchangeable products

and services, it serves as an orientation for customers. Thereby, enterprises can
differentiate themselves from competitors.
- A brand ties customers to the enterprise. Customer loyalty is an invisible, but still
considerable asset for an enterprise.
- A brand is the biggest competitive advantage. It primarily manifests itself in the pricing
of a branded product in comparison with no-name products or commodities.
- A brand is a growth driver. This competitive advantage of the brand allows an
enterprise to grow faster and operate more profitably.
- A brand is a productivity factor. It facilitates the introduction of new products.
Consumers give their trust in advance, making marketing more efficient. The
effectiveness of advertising expenditure rises, the higher the brand’s quality.
- Brands create security for customers and enterprises alike. Good brands are not only
less affected by market turbulence, but rather shape market developments. This
security is also appreciated by investors.
- Brands raise a company’s value. They create ties to investors. In enterprises with
strong brands, investors are ready to pay a considerable price for a brand. In
companies producing consumer goods, the value of a brand is, as a rule, higher than
the one of the “visible” asset of the company.

A frequently quoted hypothesis is that branded products and services generate higher and
rising profits while promoting sales growth and providing more security. In combination with an
optimum control of marketing expenditure and brand investments, this revenue-side
development leads to companies that also create more value. Thus, brand-oriented
enterprises control the long-term trade-off of brand investments and brand revenues and, as a
result, achieve higher and faster rising share prices in comparison with other, less brand-
oriented enterprises.

© 2019 European Brand Institute 1

1.1.1 Brand as an Asset
Intangible assets, brands in particular, are already of great value for companies and will gain
in importance in the future. In respect of commercial laws and tax arrangements, however, the
brand value is usually not yet shown in traditional accounting methods. This has already
changed with the worldwide first guideline ONR 16800, the international standard ISO 10668
(Brand Valuation – Requirements for monetary brand valuation) and the ÖNORM A 6800
(Valuation of the intangible asset “brand”) which were all developed under our guidance.
Brands will further gain in importance with the development of the ISO 20671 (Brand
Evaluation – Principles and Fundamentals) on which we had a significant impact.

1.1.2 Impact of the Brand Value on the Enterprise Value

In today’s environment, changes of economic indicators are at least as important for brand
control as behavioral measurement approaches. In practice, high marketing budgets, sales
promotion, high advertising pressure as well as adequate distribution lead to corresponding
sales and cash-flow developments.

Memory structures among costumers (e.g. image, trust, preference) have to be built and
monitored by appropriate actions, and measured using indicators. Enterprises should realise
that the potential of brands does not lie in generating short-term profits, but rather is long-term
in nature. Only brand owners who recognise the value of a brand and its strategic importance
will deal with it responsibly in order to benefit from its capital also in the future.

1.1.3 Brand Value as a Target Parameter

The brand value should be used as an early warning indicator and as an integral control
parameter for brand management that focuses attention on measures securing and enhancing
the strategic success potential. Valuated brands offer the possibility of quantifying the brand
as an intangible asset. This figure is to be used as a basis for making decisions on corporate
policy and finances. Thus, a brand’s importance as a factor influencing the value of an
enterprise can be expressed in internal reporting. Thereby, potentials relevant to strategic
decisions become the focus of entrepreneurial actions.

© 2019 European Brand Institute 2

1.2 Principles of our work

Based on our 20 years of experience in assessment and analysis of intangible assets as well
as our participation in national and international standards that we have influenced significanty
as chairman of the Austrian Committee for brands and patent valuation (ÖNORM A 6800 and
ÖNORM A 6801) and delegates to the ISO committee Brand Evaluation (ISO 10668), currently
as chairman of the Development Committee of ISO 20671 Brand Evaluation and the work as
a sworn and court certified expert we have dedicated ourselves to the highest professionalism
and independence. By our standards, we confirm our quality and build trust for our clients thus
making an important contribution which provides confidence for banks, investors, companies
and stakeholders.

In line with the latest international standards our work is:

Transparent
This requirement includes disclosure and quantification of valuation inputs, assumptions and
risks as well as, when appropriate, sensitivity analyses of the brand value to the main
parameters used in the valuation models.

Valid
Our valuations are based on valid and relevant inputs and assumptions as of the value date.

Reliable
If a valuation is repeated, it reliable gives a comparable and reconcilable result.

Sufficient
Brand valuations are based on sufficient data and analyses to form a reliable conclusion.

Objective
We conduct the valuation free any form of biased judgement.

IFRS – International Financial Reporting Standards

The valuations conducted in the course of this project are carried out in compliance with the
requirements of the international accounting standard IAS 38.

© 2019 European Brand Institute 3

1.3 Brand valuation in general

The complete brand evaluation framework is illustrated in figure 1. Based on the underlying
Brand Evaluation Framework (Figure 1: Brand Evaluation Framework ISO 20671) and the
mandatory requirements of the international standards ISO 10668 (Brand valuation –
Requirements for monetary valuation) as well as ON A 6800 (Valuation of the intangible asset
“brand”) an assessment of the brand management, a legal analysis, a behavioral analysis, a
market analysis, an economic and political environment analysis as well as a financial analysis
is conducted.

Figure 1: Brand Evaluation Framework ISO 20671

The framework is divided into three parts. Each part calls for identifying the value of a brand in
a particular way. Each part builds on the previous part, moving from evaluating the brand from
the stakeholder’s to the entity’s point-of-view. The framework identifies input elements used to
develop brands and output dimensions that assess Brand Strength, which leads to Brand
Performance and Brand Valuation.

© 2019 European Brand Institute 4

1.3.1 Bases of Valuation
The following aspects must be considered in the valuation according to our EBI standards and
in accordance with ISO 10668, ISO 20671 and ÖNORM A 6800:

1.3.1.1 Brand Management Analysis

The analysis of the strategic brand management refers to internal allocations to activities or
resources influencing brand value, mainly in perspective of quality, service and innovation as
well as of tangible and intangible elements. Quality elements refer to resources allocated to
quality commitment, quality management and perceived quality. Indicators of these elements
include e.g. quality management system implementation, process documentation and qualified
quality managers. Service elements refer to activities which aim to satisfy the needs of
customers and enhance brand perception and engagement. Indicators of these elements
include e.g. service capability and service effectiveness. Innovation elements refer to
resources allocated to innovation activities. Indicators of these elements include e.g.
innovation capability, sustainability and effectiveness. Tangible elements refer to identifiable
and directly measurable resources which are controlled by the entity. Indicators of these
elements include e.g. material resources and financial resources. Intangible elements refer to
intellectual, strategic and cultural resources. Indicators of these elements include e.g. history,
heritage/tradition, brand positioning and personality, brand image, human resources and
knowledge management.

1.3.1.2 Legal Analysis

The legal dimension refers notably to the brand’s status of protection and the scope of brand
rights and their ownership. The valuation must include an identification of the trademark rights
and the ownership of these rights. On the one hand, to be able to attribute the value of the
trademark rights to be assessed to the owner of the trademark rights and, on the other hand,
to identify legal parameters that influence the value of the trademark rights. Indicators of this
dimension include e.g. assessments of trademarks, trade names, copyrights, patents, internet
domains, and other aspects related to intellectual property.

© 2019 European Brand Institute 5

1.3.1.3 Behavioral Analysis
In this context, brand value is defined as a sum of associations and behaviors of all
stakeholders, which allows the owner of the trademark to generate a greater volume or greater
profit margins and thus contributes to a competitive advantage. Therefore, behavioral
dimension focuses on both psychological and behavioral perception and response. Indicators
of this dimension include e.g. how customers and other stakeholders think and feel about the
brand in positive or negative ways and whether the actions of customers and other
stakeholders reflect positive or negative reactions.

1.3.1.4 Market Analysis

The market dimension refers to the actual status of the market and opportunities for the
development of a brand and the structural limitations that market conditions may impose.
Indicators of this dimension include e.g. market size, distribution channels, the favorable or
unfavorable market forces or trends that affect a brand due to specific market conditions,
market potential and internationality.

1.3.1.5 Economic and Political Environment Analysis

The economic and political environment refers to the macro environment in which a brand is
operating. This dimension includes the indicators of favorable or unfavorable external forces
or events outside of the market itself. This includes e.g. legislative factors and supply chain
factors that may positively or negatively affect the performance of the brand.

1.3.1.6 Financial Analysis

The financial analysis is conducted by examining the financial status and the financial potential
of a brand. This information is often derived from profit and loss accounts and balance sheets
or other financial reports of companies, cities or regions. Indicators of this dimension include
e.g. profits, cost savings, margins, income, brand investment, volatility, revenue, cash-flow,
GDP, channel investments and risk rates.

1.3.2 Certified Brand

Since the conducted analyses are in accordance with the
determined international standard for brand certifications based on
ISO 20671, Certified Brand Certificates and the Certified Brand
Seal of Quality with a validity period of three years can be presented
to brands that fulfil the criteria after the brand valuation project.

© 2019 European Brand Institute 6

1.4 Monetary Brand Valuation

The monetary brand value has to represent the economic benefits of a brand across its
economic useful life. In general, the monetary value has to be calculated on the basis of brand
returns with reference to income, profits and/or cost savings.

The valuation is based on the Fair-Value-Principle. In Anglo-Saxon accounting systems (IFRS

and US GAAP), the fair value is the amount for which an asset could be exchanged, or a
liability settled, between knowledgeable, willing and independent parties in an arm’s length
transaction.

The value of the brand rights is assessed on the basis of the current benefit for the future
owner ("Actual Use") according to the level of development and the degree of implementation.

1.4.1 Valuation method

The valuation is based on the Royalty Relief Method of ÖNORM ON 6800 (valuation of the
intangible asset brand), ISO 10668 (Brand valuation – Requirements for monetary brand
valuation) and most recent relevant international standards.

Under the Royalty Relief Method, an analogy is used to approximate the financial profit
contributions (cash flows) of an intangible asset through the royalties saved by the asset’s
owner in comparison with the alternative of licensing in a comparable asset having the same
utility. The royalties are determined as the amount that would have to be paid if the subject
intangible asset was owned by a third party.

The notional license payments are determined on the basis of market royalty rates for
comparable assets (at arm’s length) that, for example, may be applied to sales. In this case,
the planned sales attributable to the subject intangible asset are then multiplied by the royalty
rate. The notional post-tax royalty payments determined are discounted to the value date using
the cost of capital specific to the asset.

The result is validated and checked for plausibility using methods of cost or market
approaches. Cost approaches are based on the net asset value method and use the costs
invested in the brand’s development or the costs required for replacing the existing brand to
measure the brand value. Market approach methods are based on actual transactions for

© 2019 European Brand Institute 7

comparable assets. Under the assumption that the brand is to be sold, a reasonable sales
price is determined.

1.4.1.1 Brand Value – Income Approach

The method of the income approach is used to determine the value of assets by calculating
the capitalized income that is expected to be generated with these assets in the future. The
method returns the income value of a brand as the present value of future brand cash flows,
i.e. surpluses from revenue and expenditure.

According to the formula below, the brand value BV is calculated by capitalizing the planned
brand cash flows BCF using the brand specific capitalization interest rate. This results from the
brand-specific cost of capital Z in the first phase and a perpetuity with a nominal perpetual
growth rate of brand cash flows g in the second phase.

For the calculation of the value of the brand value BV the following formula is used:

T
BCFt BCFT 1
BV    
t 1 1  Z 
t
 Z  g  1  Z T

BV Brand value
T valuation period (detailed planning of BCF for period T, T=5)
Z brand-specific capitalization interest rate
BCFt brand cash flow in period t after tax
BCFT brand cash flows starting from period T
t period (year)
g nominal perpetual growth rate of brand cash flows

As the accuracy of forecasts decreases when the forecasting horizon is prolonged, a 2-phase
procedure is used for forecasting the brand cash flow BCF as a function of the expected
economic life of the brand:

Phase I Detailed planning of BCF for period T

Phase II Constant or continuously growing BCFs after period T

© 2019 European Brand Institute 8

1.4.1.2 Calculation of Brand Cash Flows
The added value of a brand is reflected by the net cash flows additionally generated by that
brand. Depending on the valuation reason and data availability, brand returns can be
calculated by various methods that are described below:

Price Premium Approach

The price premium approach is based on the assumption that the producer of a product can
obtain a higher price in the market because of the product’s special characteristics. For the
costumers, the product generates an added benefit that justifies a price premium. When
calculating brand cash flows, any factors not directly associated with the brand have to be
identified and then subtracted from this price premium.

In addition, any costs required to achieve the price premium shall also be deducted. As a rule,
an unbranded or generic product is used to calculate brand cash flows. In practice, it will not
always be possible to identify such a reference product; in this case, the valuation is based on
the brand or product with the lowest brand strength.

Incremental Cash Flow Method

The incremental cash flow method compares the future expected cash flows from the
enterprise, including the subject intangible asset, with the corresponding cash flows from a
notional comparable enterprise without the asset. The comparable enterprise is treated as not
having or not using this intangible asset at all.

The incremental cash flows may result from the generation of incremental cash inflows by the
subject intangible asset or from cost savings. Any additional costs incurred have to be taken
into account as well. The difference between the cash flows from the two enterprises, period
by period, represent the incremental cash flow attributable to the subject intangible asset. To
determine the value, these incremental cash flows are discounted at the value date using the
cost of capital specific to the asset.

Royalty Relief Method

Under the royalty relief method, an analogy is used to approximate the financial profit
contributions (cash flows) of an intangible asset through the royalties saved by the asset’s
owner in comparison with the alternative of licensing in a comparable asset having the same
utility. The royalties are determined as the amount that would have to be paid if the subject
intangible asset was owned by a third party.

© 2019 European Brand Institute 9

The notional license payments are determined on the basis of market royalty rates for
comparable assets (at arm’s length) that, for example, may be applied to sales. In this case,
the planned sales attributable to the subject intangible asset are then multiplied by the royalty
rate. The notional post-tax royalty payments determined are discounted to the value date using
the cost of capital specific to the asset. This method requires that there are comparable assets
that are regularly licensed between knowledgeable, willing and independent parties. Under this
method, the royalty rate has to be determined after a thorough check of the key aspects of the
comparable transaction.

1.4.1.3 Determination of Brand-Specific Cost of Capital

At first, the Capital Asset Pricing Model (CAPM) is used to calculate the weighted average cost
of capital WACC on the basis of a peer group. To take account of the influence of the brand
strength on the risk involved in future business development, the weighted average cost of
capital WACC is weighted by the brand indicator factor k in the next step. Thereby, the brand-
specific cost of capital rate Z is obtained.

𝑊𝐴𝐶𝐶 + 𝑅𝑖𝑠𝑘𝑝𝑟𝑒𝑚𝑖𝑢𝑚𝐵𝑅𝐴𝑁𝐷
𝑍=
𝑘

Z brand-specific capitalization interest rate

WACC weighted average cost of capital
RiskpremiumBRAND Segment and brand specific risk premium
k brand indicator factor

The weighted average cost of capital corresponds to the cost of capital weighted by the capital
structure of the peer group. In addition, brand-specific risk premiums RiskpremiumBRAND can
be used. In accordance to the formula stated below the weighted average cost of capital WACC
is calculated:

𝐸 𝐷𝐶
𝑊𝐴𝐶𝐶 = ∙ 𝑘𝐸 + ∙ 𝑘𝐷 ∙ (1 − 𝐶𝑇)
𝑇𝐶 𝑇𝐶
© 2019 European Brand Institute 10
WACC weighted average cost of capital
TC total capital
E equity
DC debt capital
kE cost of equity
kD cost of debt after taxes
CT corporate taxes

The cost of equity „ke” equals the required rate of return of the equity investors for the indebted
company. Based on the Capital Asset Pricing Model (CAPM), this figure can be calculated
according to the following formula:

𝑘𝐸 = 𝑟𝑓 + 𝛽 ∙ 𝑀𝑅𝑃

kE cost of equity

rf risk-free interest rate (e.g. yield on long-term government bonds)

β market volatility of an enterprise’s share price equals the volatility of the market
index

β= 1 The volatility of the enterprise’s share price equals the volatility of the
market index.

β>1 The volatility of the share price is higher than the volatility of the market
index. Thus, the share is more risky or more aggressive than the market.

β<1 The share’s market volatility is lower than the volatility oft he market
index. Thus, that share rather is a „conservative” investment.

MRP market risk premium; market interest rate to be paid by an enterprise minus a
risk-free interest rate

Hence, it corresponds to the surcharge that an enterprise has to pay in

comparison with a risk-free investment due to the market’s assessment of the
entrepreneurial risk.

© 2019 European Brand Institute 11

1.4.1.4 Economic Useful Life
To determine the economic useful life T, general trends shall be analysed in the industry in
which the brand is used. A valuation shall not build on forecasts that exceed the residual
economic useful life T.

1.4.1.5 Long-Term Growth Rates

A long-term growth rate is used for the valuation after the direct forecasting period. The growth
rate used shall be based on reasonable economic foundations.

1.4.1.6 Brand Indicator Factor

The brand indicator factor k serves to consider a brand’s strengths and weaknesses in the
discount interest rate. All the risk premiums as well as advantages and securities resulting from
the brand are taken into account in this interest rate. The surcharges and deductions are
always related to an average product of the sector concerned.

The selection and weighting of the factors is carried out by the valuator for specific sectors,
companies and business units.

1.4.2 Validation and plausibility check of the results

To ensure validity and reliability of the results, a valuation must be based on valid and relevant
inputs and assumptions and consider the time of the valuation date. If a valuation is repeated,
it shall reliably give a comparable and reconcilable result. Therefore, methods of cost or market
approaches are used for the validation and plausibility checking of the results.

1.4.2.1 Cost Approaches

Description of Cost Approaches
Cost approaches are based on the net asset value method and use the costs invested in the
brand’s development or the costs required for replacing the existing brand to measure the
brand value.

Application of Cost Approaches

As a rule, the result of the different cost approach methods constitute the minimum level of the
brand’s value. Cost-oriented approaches are used if other methods cannot be applied and/or
are mainly used to validate the results of other methods.

© 2019 European Brand Institute 12

Historical Cost Method
The valuation uses the historical costs incurred that are directly attributable to the development
and protection of the brand.

Replacement Cost Method

The valuation uses the expected costs required for producing an asset having the same utility.
The replacement costs shall be calculated on the basis of the costs prevailing on the value
date.

1.4.2.2 Market Approaches

Description of Market Approaches
These methods are based on actual transactions for comparable assets. Under the
assumption that the brand is to be sold, a reasonable sales price is determined. In a first step,
data on comparable transactions have to be collected and then the observed market prices
need to be adjusted for differences between the brands observed and the subject brand.

On the basis of the acquisition price, market multipliers have to be calculated that have to be
applied to the brand to be valuated.

Application of Market Approaches

The brands used for calculating market multipliers shall be similar to the brand to be valuated
in terms of market situation, brand strength, trade mark rights and economic situation.

Multiple Revenue – Brand Value (Brand Revenue Multiple)

Brand-value-to-revenue multiples are used to calculate the brand value of a comparable brand
with a similar brand strength.

Multiple Revenue – Company Value and Share Brand Value to Company Value
Company-value-to-revenue multiples are used to calculate the brand value and then the share
of the brand value of the company value of a comparable brand with a similar brand strength.

© 2019 European Brand Institute 13

2. European Brand Institute - Studies

The European Brand Institute offers itself as an interdisciplinary platform for experts of theory
and practice who are interested in the measurability of immaterial assets. An active
research work, regular events, publications of research results and brand evaluation
clarify value, influence, chances and risks of patents and brands for companies, stakeholders,
countries and regions and therefore pay dues to the sustainable development of society.

Every year, the European Brand Institute publishes rankings of brand corporations. For the
“GLOBAL TOP 100 BRAND CORPORATIONS RANKING“, the institute examines more than
3.000 brand corporations and their brands in 16 industries according to the latest ISO
valuation standards.

Furthermore, an annual ranking of national brand corporations is published. The Austrian

Brand Value Study (ÖMWS) determines domestic brand companies from the "trend TOP 500"
ranking, which are more than 45% in national ownership. These selected brand companies will
be valued according to latest standards analyzing categories such as industry, brand strength,
trend development, brand potential and sales. The analyses of the ÖMWS are conducted on
the basis of more than 180 Austrian brand companies in 16 different industries, resulting in the
publication of the TOP 10 Austrian brands.

2.1 Brand selection criteria

In the course of the Global TOP 100 Study, as well as in other national studies, the following
brands are valuated against the background of the international and European brand
landscape and brand politics:

2.1.1 Brand companies

Brand portfolio companies or brand companies which are more than 45% in "national"
ownership, the attribution to the respective country is made based on the main owner, or
location and stock market.

2.1.2 Brand corporations and single brands – the European way

In Europe, brand portfolios are often and very successfully used. Mere single-brand
analyses and valuations would not adequately represent the success and value contribution
of European brand management. That's why we are the only institute to put brand
corporations, i.e. brand portfolio companies, first.

© 2019 European Brand Institute 14

The study methodology was developed to enable analysis by both brand companies as
owners and managers of multiple brands (brand corporation) and / or single brands.

2.1.3 Significant brands

Global and European brands, which show significant presence and awareness in the
respective market segment i.e. especially among customers as well as in B2B in Europe and
beyond.

2.1.4 Private and listed companies with publicly available information

In Europe, it has been shown that significant brands are often owned and managed by
privately owned companies. Therefore, the study method was chosen so that the analysis
of listed companies but also companies with brands in private property - if there is sufficient
marketing, customer and financial information publicly available - is made possible.

2.2 The Study Methodology

The study methodology is based on the long-standing evaluation practice and was developed
especially for this study:

Step 1: Brand Strength analysis

Comparative analyses in the segment and sector of the brand or brand portfolio nationally and
internationally, as well as comparative analyses across the segments and national markets,
incorporating the European Brand Institute database including:

 Historical development and trends,

 Competitive situation – market growth and market attractively,
 Market position – market share, market share development, profitability
 Target groups – awareness, satisfaction, customer loyalty
 Investments – communications budget, Share of Voice
 Potential – market, internationality

Result: Brand Strength

© 2019 European Brand Institute 15

Step 2: Financial analysis
a) Market and sector analyses

On the one hand, the environment, market and segments in which the brand is “embedded”
are analyzed based on publicly available information and information from our database. On
the other hand, an analysis of (macro-) economic key figures and forecasts based on publicly
available information from the World Bank, IMF, EU, etc. is carried out.

Result: Economic forecasts for the segments as well as segment- and sector-specific risk
rates or discount rates

b) Financial analysis specific for brand companies

Financial and risk analysis based on historical development as well as on the forecast of future
developments

Result: Revenue forecasts for the brand company 5 years in detail, perpetual growth rate and
company-specific risk rates or discount rates

Step 3: Determination of the brand-specific cash flows BCF and capitalization interest
rate Z
a) Brand-specific cash flows – BCF

The calculation basis of the brand-specific cash flows is comprised of the following four factors.
The Brand Strength from Step 1, the brand-specific revenue forecasts from Step 2b, a brand-
specific demand analysis (i.e. analysis of the impact of the brand on the purchase decision
– this is, for example, greater in the segment Consumer Goods than in the segment Industry)
and the analysis of license analogies (Royalty Relief Method) for the target brand or brand
portfolio. Based on these factors, the brand-specific cash flow, i.e. the after tax cash flow solely
attributable to the brand or brand portfolio (BCF), is determined.

b) Brand-specific capitalization interest rate

The brand-specific capitalization interest rate after tax is determined from the analysis of the
Brand Strength from Step 1 and the segment-specific or, in the further, company-specific
discount rate from Step 2b.

© 2019 European Brand Institute 16

Step 4: Calculation of brand values

The brand-specific cash flows BCF in the forecast period T are discounted as per the formula
below to the Net Present Value and thus to the brand value BV, taking into account the
perpetual growth g with the brand-specific discount rate Z:

T
BCFt BCFT 1
BV    
t 1 1  Z 
t
 Z  g  1  Z T
BV brand value
T valuation period (detailed planning of BCF for period T, T=5)
Z brand-specific capitalization interest rate
BCFt brand cash flow in period t after tax
BCFT brand cash flows starting from period T
t period (year)
g nominal perpetual growth rate of brand cash flows

Step 5: Plausibility check of the results

In order to ensure validity and reliability, the results are validated and made plausible by means
of market comparison methods using multiples.

A comparable brand is selected from the benchmark database and brand-specific multiples
are calculated using the known relation between brand value and revenue (Brand Revenue
Multiple) or the relation between company value and revenue as well as the share of the brand
value in the company value of a comparison company. These brand-specific multiples are used
for the target company and thus the values from Step 4 are made plausible.

Step 6: Analyses of sectors, countries and macroeconomics

On the basis of the brand valuations, changes of recent years and results per sector, sector-
specific analyses and valuations are prepared.

Country-specific and macroeconomic analyses and valuations are furthermore prepared based
on evaluations of the brand portfolios or brands, changes of recent years, results per country
and macroeconomic analyses and comparisons

© 2019 European Brand Institute 17

3. European Brand Institute - Facts

FACT SHEET * VALUATION & STRATEGY

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industries
In building brand-an IP-oriented company structures,
EBI supports the European economy and guides EBI proves and enlarges its competence continuously
small and medium-sized companies to maximize through independent brand & IP valuation and
brand & IP value and sustainability. research and its contribution to national and
international standardization.
Through innovative services EBI supports companies
and organisations to manage their most important EBI’s executive director Dr. Gerhard Hrebicek, MBA is
intangible assets – the brand & IP – in a value- initiator & chairman of the world´s first brand and patent
oriented manner in order to realise competitive valuation standards ONR 16800, ÖNORM A6800,
advantages. ÖNORM A6801 and Austria´s delegate to the ISO
project committee „brand valuation“ ISO 10688;
furthermore he acts as officially appointed and sworn
Annual Studies brand & IP valuation expert for the Republic of Austria
 Conducts Austrian brand value study
“Österreichische Marken Wert Studie”
Media coverage in more than 28 countries within
 Conducts Europe’s first brand value study “EBI”, Europe & worldwide
analysing more than 3.000 brand corporations
within 24 countries and 16 industries Austria, Belgium, Bosnia Herzegovina, Croatia, Czech
 Presents the Global 100 most valuable Republic, Denmark, Estonia, Finland, France,
brands including brands from Europe, Asia and Germany, Greece, Hungary, Italy, Kazakhstan, Latvia,
America Lithuania, Netherlands, Norway, Poland, Romania,
 Conducts the City Brand Value Study („European Russia, Switzerland, Serbia, Slovak Republic,
City Brand Ranking“) analysing 100 European Slovenia, Spain, Ukraine, UK; USA, Australia,
cities Canada;
Countries analysed Media coverage in prestigious media, eg.
Austria, Belgium, Bulgaria, Croatia, Czech Republic,
Denmark, Finland, France, Germany, Hungary, Italy, Finanznachrichten.de, Focus, wallstreet-online.de,
Luxembourg, Netherlands, Norway, Poland, Portugal, ZEITonline, FTD, Stern, Spiegel, Cash.ch, Die
Romania, Russia, Slovak Republic, Slovenia, Spain, Presse, News, Wirtschaftsblatt, Kronen Zeitung, Der
Switzerland, Sweden, UK, Asia, Japan, China, Standard, Finance, Blick, Expert.ru, Vedomosti,
Hongkong, Malaysia, India, Saudi Arabia, America Börse-Express.com, Le Matin, Expansion,
USA, Canada, Brasil; Ekstrabladet, dinero, etc.
Industries analysed A ranking of Europe’s and Global 100 most valuable
Financial Services, Consumer Goods, Telco, Retail, brand corporations, single brands, country & industry
Durables, Automotive, IT & Technology, Pharmacy, analyses and country reports are provided
Health & Biotech, Media & Entertainment, Luxury,
Business Services, Utilities, Industry, Travel &
Tourism, Gaming, Logistics;

Partner of

© 2019 European Brand Institute 18

Principles of our work

Based on our 20 years of experience in assessment and analysis of intangible assets as well
as our participation in national and international standards that we have influenced strongly as
chairman of the Austrian Committee for brands and patent valuation (ÖNORM A 6800 and
ÖNORM A 6801) and delegates to the ISO committee Brand Evaluation (ISO 10668), currently
as chairman of the Development Committee of ISO 20671 Brand Evaluation and the work as
a sworn and court certified expert we have dedicated ourselves to the highest professionalism
and independence.

By our standards, we confirm our quality and build trust for our clients thus making an important
contribution which provides confidence for banks, investors, companies and stakeholders.

IMPRINT

EBI - GLOBAL GmbH Partner of

Börsegasse 9
A-1010 Wien
[email protected]
www.europeanbrandinstitute.com

Kontakt
Kommerzialrat
DI Dr. Gerhard Hrebicek, MBA
CEO
43 1 532 1000 52
[email protected]

© 2019 European Brand Institute 19