Intragroup transfer of intangible assets

Expertise : Litigation

Business challenge

• A global leader in consumer products wished to transfer a basket of intangible assets (brand names) of great value to another subsidiary of the group, and then set up a usage fee system for the use of these brand names.
• The conduct of this operation should be assessed according to the brand valuation (which created a taxable added value) and the level and structure of the usage fee to be imposed.

Approac

The methodology used for valuing the brands included:

• A simulation of the market operations to measure the added value created by the brand (price premium and volume effect),
• A Monte Carlo type cost model that established a confidence interval of the valuation taking into account the effects of many parameters that may have an impact on the value,
• A configurable model that calculate the impact of the usage fees on taxable income of all subsidiaries of the group.

Benefits and results

• The model enabled the management of the group to test many scenarios in order to estimate risk and profitability.
• The results from the model led the group to abandon the decision to transfer the brands, contrary to their initial strategy.