Greenfield Method

A valuation technique that estimates the value of an intangible asset by comparing the projected cash flows of a business with the asset to those without it. The difference in present value represents the asset's contribution and is commonly used to value non-compete agreements, assembled workforces, and technology assets.

A widely used income-based valuation technique that estimates the value of an intangible asset by calculating the present value of hypothetical royalty payments that the owner is relieved from paying by virtue of owning the asset. The method is commonly applied to value trademarks, patents, technology, and trade names in both transaction and financial reporting contexts.

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.

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

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.

A valuation technique used to isolate the value of a specific intangible asset by deducting the returns attributable to all other assets (tangible and intangible) from total earnings. The multi-period excess earnings method is the most common approach for valuing customer relationships and technology in purchase price allocations.

A cost-based valuation approach that estimates the value of an intangible asset by calculating the current cost of creating or acquiring a substitute asset with equivalent utility. The replacement cost method is frequently used for valuing assembled workforces, proprietary software, and databases, adjusted for any functional or economic obsolescence.

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.

What is the Greenfield method and when is it applicable?

The Greenfield method models what it would cost to build the business from scratch using only the subject intangible asset, estimating years to profitability and required investment.

What is the Greenfield method and when is it used for intangible valuation?

The Greenfield method values an intangible asset by modelling the cash flows of a hypothetical start-up business that owns only that single asset and must build everything else from scratch.

How do fintech companies value their licences and regulatory approvals?

Fintech licences (FCA authorisation, e-money licences, banking licences) are valued using the Greenfield or cost approach, reflecting the time, cost, and uncertainty of obtaining them independently.