IP Valuation
A defensible value placed on intellectual property for deal pricing, financial reporting, tax positions, or lending purposes.
What It Is
A formal IP Valuation engagement that produces a documented value for specific IP assets or an IP portfolio. The methodology depends on the purpose (deal pricing, purchase price allocation, transfer pricing, lending), the nature of the IP, and the available data. Approaches include the income-based methods (royalty relief, excess earnings), the cost-based method (replacement cost), and the market-based method (comparable transactions), often used in combination.
The output is a defensible value supported by methodology, data, and reasoning that holds up to scrutiny from auditors, counterparties, tax authorities, or lenders.
Why You Would Need It
Most engagements are triggered by a specific event requiring a documented value: a transaction (where the value affects pricing or allocation), a tax position (where transfer pricing or post-acquisition allocation depends on it), a financial reporting requirement (typically post-acquisition under IFRS 3), or a lending arrangement (where IP serves as collateral).
IP Valuation is rarely commissioned in the abstract. Where the purpose is broader (understanding which assets carry the most value to inform IP investment decisions), the work is typically delivered as part of a Strategy or Discovery engagement using lighter-touch methodology, not as a formal valuation.
A valuation report supporting the value with methodology, assumptions, data sources, and reasoning. Structured to be defensible to the specific audience (auditors, tax authorities, counterparties, lenders). For complex engagements, includes sensitivity analysis showing how the value moves with key assumptions.
Where This Sits In The Broader IP Work
On the transactions side, follows Pre-Deal IP Screening (which establishes the IP picture) or ExitIP (which prepares the estate); supports deal pricing, SPA negotiation, and post-completion allocation. On the tax side, supports transfer pricing positions and other contexts where defensible valuations matter, working alongside the client’s tax advisers. The underlying methodology is similar across these contexts but tuned to the specific defensibility requirement.
Valuation work also supports disputes and litigation, providing damages and valuation input alongside legal counsel.
