VALUATIONS TREND ALERT: Decreasing IP Values among Retail and Consumer Products Companies
Recently, we have observed an emerging downward trend in the valuation of retail and consumer brands and related intellectual property. While many companies in this sector continue to perform strongly, average collateral valuations for brand assets are down 5% to 15% year-over-year on average. This trend is especially noticeable among brands whose principal channels of product distribution include mall based specialty stores, department stores and mass merchants, and whose principal product categories are apparel and luxury softlines and accessories.
Multiple factors are contributing to this trend, including:
- Reduced Mall Traffic Putting Pressure on the Specialty Store Channel
- Declining Sales and Reduced Square Footage in the Department Store Channel
- Declining Sales and Slower Growth in the Mass Merchant Channel
- Competition in the Ecommerce Channel
- Continued Growth in the Off-Price Channel
- Maturity in the Portfolios of Pure Play Licensing Companies and Reductions in Share Values
- The Strengthening US Dollar
- Economic Weakness in China and the Eurozone
The year-over-year market capitalization of publically traded pure play licensing companies has decreased approximately 50% at the same time that borrowing costs have increased. This reduction in liquidity coupled with softening market conditions for its licensees reduces the likelihood that these companies will provide secondary market strategies for unsuccessful consumer and retail brands. In recent distressed sales of consumer and retail brands, buyers have been predominantly privately-held brand management companies and strategics focused on vertical integration, and expanding or consolidating footprints and channels.
Lenders should consider whether these factors affect the IP assets in the collateral securing their loan portfolios and should consider re-assessing or updating past valuations.
Hilco Valuation Services is the “go to” expert for intangible asset valuation services. Annually, we deliver hundreds of valuations focused on trademarks and trade dress, patents, copyrights, licensing agreements, trade secrets, customer lists, domain names, and databases/libraries for asset based and cash flow lending, financial reporting, compliance, transaction based activities and valuation dispute purposes. Our reports are recognized and accepted by lenders, equity sponsors, hedge funds, accountants, attorneys, judges, investment bankers, consultants, turnaround professionals, regulators, as well as the C-level suite.
Where others use assumptions and methodology to determine value, we use real-time, hard market data, accumulated through our international asset acquisition/disposition platform. We leverage our market knowledge to provide valuations that stand the test of subsequent disposition transactions.
Hilco Streambank understands the market for intangibles better because we are the market makers. We consistently generateintangible asset recoveries that exceed seller expectations. We offer multiple disposition solutions to meet every seller’s specific needs. Our international capabilities span all market sectors, which enable us to identify more strategic buyers and to create a more competitive sale process.
If you have questions concerning these trends and their impact on IP values, please call us.