Trademarks and Service Marks: Valuation Guide

Why Trademarks Are Among the Most Valuable Intangible Assets

Trademarks and service marks sit at the intersection of legal protection and commercial value. A trademark — whether a word mark, logo, slogan, or combination — grants exclusive rights to use a distinctive sign in connection with goods or services. When a business is acquired, these marks frequently represent a substantial portion of the purchase price, sometimes exceeding the value of all other identifiable intangible assets combined.

Under IFRS 3 (Business Combinations), trademarks are classified as marketing-related intangible assets. They must be separately recognised and measured at fair value when they are identifiable — meaning they arise from contractual or legal rights, or are separable from the acquired business. Registration provides the clearest evidence of identifiability, but even unregistered marks can qualify if they are separable.

Trademarks vs Service Marks: The Distinction

A trademark protects a sign used in connection with goods — think of the Apple logo on hardware or the Coca-Cola script on bottles. A service mark protects a sign used in connection with services — the McKinsey name on consulting, or the Hilton brand on hospitality. In most jurisdictions, the legal framework is identical; the distinction is primarily one of application.

For valuation purposes, the distinction rarely matters. Both types of mark protect brand identity, both generate economic benefit through consumer recognition, and both are valued using the same methods. The critical factors are the strength of the mark, its geographic scope, and the revenue it helps generate.

The Relief-from-Royalty Method for Trademarks

The Relief-from-Royalty (RFR) method is the primary valuation approach for trademarks in purchase price allocations. The logic is straightforward: if the acquirer did not own the trademark, they would need to license it from a third party. The fair value of the trademark equals the present value of the royalty payments avoided through ownership.

Key Inputs

Selecting the Royalty Rate

The royalty rate is the single most consequential input. It must reflect what a willing licensee would pay a willing licensor for the right to use the specific mark. Sources include:

• Comparable licence agreements — actual arm's-length transactions for similar marks in the same industry
• Royalty rate databases — RoyaltyStat, ktMINE, and similar repositories provide transaction data
• Industry benchmarks — pharmaceutical trademarks typically command 1-3%, luxury goods 5-10%, and technology brands 2-5%
• Profit split analysis — where direct comparables are unavailable, splitting the profit between the trademark and other contributing assets

Worked Example: Trademark Valuation

Consider a consumer goods company acquiring a brand with £50 million in annual revenue. Due diligence identifies three comparable licence agreements suggesting a royalty rate of 4%. The trademark has an estimated remaining useful life of 15 years, and the risk-adjusted discount rate is 12%.

Common Pitfalls in Trademark Valuation

Conflating the trademark with the broader brand

A trademark is a legal right. A brand encompasses reputation, customer perception, marketing investment, and organisational culture. In a PPA, the trademark is valued separately from customer relationships, assembled workforce, and other brand-adjacent assets. Double-counting occurs when the royalty rate implicitly includes the value of these related assets.

Ignoring geographic limitations

A UK-registered trademark has no protection in the United States. When valuing marks with multi-jurisdictional coverage, each registration must be assessed for its contribution to revenue in that territory. A mark registered in 50 countries is worth more than one registered in five — but only if the business generates meaningful revenue in those additional markets.

Assuming indefinite life

While trademarks can be renewed indefinitely, their economic useful life is not infinite. Consumer preferences shift, markets evolve, and brands can become diluted or irrelevant. A conservative approach assigns a finite useful life with a terminal value, rather than assuming perpetual cash flows.

Recognition and Amortisation

Under IFRS 3, trademarks acquired in a business combination are recognised at fair value on the acquisition date. They are subsequently amortised over their useful economic life unless the life is assessed as indefinite — in which case, no amortisation occurs, but annual impairment testing is required under IAS 36.

The distinction between definite and indefinite useful life has significant implications:

Trademarks in the Opagio Framework

Opagio's intangible asset valuator classifies trademarks under the marketing-related category within the IFRS 3 framework, and under brand equity within the CHS growth accounting model. This dual classification matters because CHS captures the strategic investment in building brand value — marketing spend, design investment, customer experience — while IFRS 3 captures the legal asset that crystallises from that investment.

For founders and CFOs seeking to understand the value their trademarks represent, the starting point is identification: which marks does the business own, where are they registered, and what revenue do they protect? From there, a structured valuation approach can quantify the value that is often invisible on the balance sheet.

Explore our complete guide to 35 types of intangible assets or learn about intangible asset valuation methods for a broader perspective on valuation approaches.

Tony Hillier is an Advisor at Opagio with over 30 years of experience in structured finance, M&A advisory, and intangible asset valuation. Meet the team.