What is the With-and-Without method for valuing intangible assets?

Full Explanation

Example: a company develops a proprietary manufacturing process that reduces costs by 10%. The With-and-Without method values the company with the process and without it, attributing the difference to the process value. Steps: 1) Project financials with the asset (including competitive advantage from the process), 2) Project financials without the asset (company uses standard manufacturing), 3) Calculate present value of both scenarios, 4) The difference is the asset value. With-and-Without is conceptually similar to Relief from Royalty but focused on cost savings rather than revenue premiums. Used for valuing cost-reduction innovations, proprietary processes, and operational efficiency improvements. The challenge: determining realistic cash flows 'without' the asset requires judgment — how much less profitable would the company be? In the Asset Valuator in Opagio Intangibles, With-and-Without is one of the seven methods you can choose, and it suits an asset that drives cost advantage rather than revenue premium (e.g., proprietary manufacturing, logistics optimisation).

Tax amortisation benefit (TAB) is an important consideration in intangible asset valuations performed for acquisition purposes. When an acquirer can amortise the fair value of acquired intangible assets for tax purposes, the resulting tax shields increase the asset's value to the buyer. The TAB adjustment can add 10-25% to the pre-TAB value depending on the jurisdiction, tax rate, and useful life. In the UK, in an asset purchase, acquired intellectual property is generally eligible for amortisation relief under the intangible fixed assets regime introduced in 2002 (goodwill and customer-related intangibles only when bought with qualifying IP). A share purchase gives the buyer no relief, although a fair value still includes the TAB.

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