With and Without (W&W) Method
Valuation Methods — Lesson 4 of 10
The With and Without method is conceptually the most intuitive of all intangible asset valuation techniques. Its premise is simple: the value of an asset equals the difference between the business's cash flows with the asset and the business's cash flows without it. The gap between those two scenarios — discounted to present value — is the asset's fair value.
Despite its intuitive appeal, the W&W method is among the most challenging to execute well. It requires constructing a credible counterfactual — a projection of what the business would look like if the asset did not exist. That counterfactual must be realistic, internally consistent, and defensible. The temptation to exaggerate the "without" scenario (and thereby inflate the asset's value) is ever-present.
This lesson explains when the W&W method is appropriate, how to construct robust scenarios, and provides a worked example for a non-compete agreement — the asset type most commonly valued using this approach.
The With and Without method values an intangible asset as the present value of the incremental cash flows the asset provides. Its strength is its ability to value assets whose impact is primarily defensive (preventing harm rather than generating revenue). Its weakness is the subjectivity inherent in constructing the "without" scenario.
When to Use W&W
The W&W method is the preferred approach for specific asset types where the other income methods are less suitable.
W&W Method Application Guide
| Asset Type | Why W&W Is Preferred | Alternative |
|---|---|---|
| Non-compete agreements | Value is defensive — preventing competition, not generating revenue | None — W&W is the standard method |
| In-process R&D | Value is the incremental benefit of completing development vs. starting over | DCF (if cash flows are isolable) |
| Favourable contracts | Value is the difference between contract terms and market terms | DCF (contract-specific) |
| Technology (when combined with other IP) | Isolating the incremental value of one technology component | RFR (if licensing data exists) |
| Regulatory approvals | Value is the cost and time avoided by having the approval | Cost approach (as cross-check) |
The W&W method should not be used when a more direct method is available. If an asset generates royalty savings (use RFR) or is the primary earnings driver (use MPEEM), those methods provide more reliable results because they require less counterfactual construction.
Constructing the Scenarios
The quality of a W&W valuation depends entirely on the quality of the two scenarios.
The "With" Scenario
This is typically the business plan — the projection of cash flows assuming the asset remains in place. In a PPA context, it is the post-acquisition business plan that the acquirer has prepared (or the pre-acquisition forecasts provided by the target's management).