September 13, 2021
Trademark royalties in the sector of universities and colleges: MARKABLES analyzed the brand values reported in corporate acquisitions and the respective trademark royalty rates of higher education institutions. The average royalty rate of brand names of universities and colleges is in the range from 3.0 to 3.5%. Brand names account for 10%-15% of the total enterprise value of such institutions on average.
Who would not know about MIT, Oxford, Stanford, Cambridge and Harvard? These are the five most reputed universities in the world, according to the 2022 QS World University Ranking.
Not all higher education institutions are government-funded non-profit organizations, and there is a lively M&A activity in this sector across the globe. All of these institutions live from their brand name and reputation which attract students from a wider catchment area. Even more, these institutions must renew their student base every 2 to 4 years. Therefore, brand and branding are of utmost importance.
MARKABLES analyzed the brand values reported in 17 corporate acquisitions of higher education institutions between 2014 and 2020. The average royalty rate applied in the valuation of brand names of universities and colleges is in the range from 3.0 to 3.5%. Brand names account for 10%-15% of the total enterprise value of such institutions on average.
As often, there is a strong correlation of royalty rates and profitability in this sector. Based on the sales multiple (enterprise value to revenues) as profitability measure, the royalty rate on the brand name increases with increasing profitability of the underlying business. Or in other words: the profitability of businesses explains in large part the bandwidth of appropriate royalty rates in a particular sector. Please see the respective chart here.
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