Brand Valuation Standardization

Brand Valuation Standardization

Every kind of brand valuation process has a balance sheet. The balance sheet prompted a similar recognition of internally generated Brands as valuable financial assets within a company. In 1988, Rank Hovis McDougall (rhm), a leading UK food conglomerate, played heavily on the power of its brands to successfully defend a hostile takeover bid by Goodman Fielder Wattie (gfw). rhm’s defence strategy involved carrying out an exercise that demonstrated the value of rhm’s brand portfolio. This was the first independent brand valuation establishing that it was possible to value brands not only when they had been acquired, but also when they had been created by the company itself. After successfully fending off the gfw bid, rhm included in its 1988 financial accounts the value of both the internally generated and acquired brands under “intangible assets” on the balance sheet.

In 1989, the London Stock Exchange endorsed the concept of brand valuation as used by rhm by allowing the inclusion of intangible assets in the class tests for shareholder approvals during takeovers. This proved to be the impetus for a wave of major branded-goods companies to recognise the value of brands as intangible assets on their balance sheets. In the UK, these included Cadbury Schweppes, Grand Metropolitan (when it acquired Pillsbury for $5 billion), Guinness, Ladbrokes (when it acquired Hilton) and United Biscuits (including the Smith’s brand.

Source: Madden, T.J., Fehle, F. and Fournier, S.M., Brands Matter: An Empirical Investigation of Brand-building Activities and the Creation of Shareholder Value.