Excess Earnings Method

An income approach valuation technique that values a primary intangible asset by isolating the cash flows attributable to it after deducting fair returns on all other contributory assets. MPEEM is the most commonly used method for valuing customer relationships in purchase price allocations under IFRS 3 and ASC 805.

A variant of the multi-period excess earnings method used to value customer relationship intangible assets, which analyses the business from the perspective of a hypothetical distributor that owns only the customer relationships and licenses all other assets from the operating entity. The distributor method simplifies contributory asset charge estimation by modelling a lean distribution business rather than the full operating entity.

A valuation approach that estimates the value of a business by adjusting the book values of all assets and liabilities to their fair values, including the recognition of off-balance-sheet intangible assets that meet IFRS 3 or ASC 805 recognition criteria. The adjusted net asset method is primarily used for asset-holding companies, investment vehicles, and businesses where value resides primarily in the asset base rather than earnings capacity.

An approach to measuring goodwill in a business combination where goodwill is recognised for both the acquirer's share and the non-controlling interest's share, resulting in a higher total goodwill figure. Under ASC 805, the full goodwill method is mandatory for all business combinations.

A market approach valuation technique that estimates the value of a subject company by reference to the prices paid in actual acquisitions of comparable businesses. The method involves identifying relevant transactions, extracting implied valuation multiples, adjusting for differences in timing, deal structure, and synergy expectations, and applying the adjusted multiples to the subject company.

The practice of valuing assets at their current market price rather than their historical cost. Mark-to-market accounting provides a more timely view of portfolio value but can introduce volatility, particularly for intangible-heavy investments where market prices may fluctuate significantly in response to sentiment and information flow.

The ratio of a company's market value to the replacement cost of its assets, proposed by economist James Tobin. A Tobin's Q greater than one suggests that the market values the firm above its tangible asset base, with the excess often attributable to intangible assets such as brand, technology, and human capital.

A technique for estimating the weighted average cost of capital by constructing the cost of equity from individual risk components rather than deriving it solely from market data. The build-up method typically starts with the risk-free rate and adds an equity risk premium, size premium, industry risk premium, and company-specific risk premium.

AI Valuation Methods for M&A and Due Diligence

How does the Asset Valuator in Opagio Intangibles work?

The Asset Valuator in Opagio Intangibles values one asset at a time. You choose a method, such as Relief from Royalty, MPEEM or the Cost Approach, enter its inputs, and it calculates a fair value estimate.

How do you value trade secrets as intangible assets?

Trade secrets are valued using the income approach (With-and-Without method comparing profitability with and without the secret knowledge) or cost approach (reproduction cost of the proprietary knowledge including R&D and opportunity cost).

How do you value a non-compete agreement as an intangible asset?

Non-compete agreements are valued using the With-and-Without method, comparing projected cash flows with the agreement in place versus a scenario where the seller competes freely.