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September 8, 2017

Rebranding after M&A suggests short RUL for acquired brands

74% of all acquired businesses are rebranded within the first seven years, the recent M&A brand study of Landor says. Landor analyzed 2,300 acquisitions of S&P Global 100 companies over the last 10 years. Accordingly, deal size and sector do matter. The larger a transaction, the longer the transition time. The IT, financial services, health care, and energy sectors display the highest likelihood of changing an acquired brand. A very high number overall, and evidence not to overestimate the longevity and value of brand names.

These findings are in contrast to purchase valuation and accounting. Remaining useful lives (RUL) assumed as of the date of the acquisition are typically much longer than in this study. Some might say this is not a big issue as IFRS and ASC provide for one-off impairments. Correct. But on the other side, equity investors and analysts don’t appreciate impairments which are perceived as wrong (too optimistic) expectations of management.

This is just another reference to put more emphasis on the appropriate determination of RUL of trademarks. MARKABLES provides – among other – comparable useful life data for trademarks.  In this context, you may want to read these two articles:

The Useful Life of Trademarks, WTR 2014

Indefinite is Not Infinite – Solving a Dichotomy in Trademark Valuation, BVR 2015

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