If there is a holding company with several subsidiaries named A to F
Assume A holds the trademark rights, (or patent rights) for the brand name all use.
How can you prove that A's projected earnings and valation will be greater than the other subsidiaries as a function of holding the patent/trademark which the other subsidiaries also use.
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any real life example?
I Would just value the holding... If I were to value A alone then BCDF would not be able to use the trademark anymore or they would need to pay royalties and that's a good start for potentially achieving what you want although your questions remains vague. more details perhaps?
basically yes that since BCDF have to pay royalties their projections and valuation would be comparatively lower (assuming operations wise they are on similar level)
the problem i have is that while this is fairly intuitive this is a thesis im putting forward at this point. Are there any real world examples (any where in the world) which would prove that this is actually the case?
is there any actual group of companies, subsidiaries etc which anyone here knows which i could use to give a real life case study for this? i could perhaps then give forth their valuation multiples and make a case that since A holds the trademark/patent/copyright that BCDF also use, A's comps are relatively higher
Just to help me does anyone know examples of a few companies under a parent company where one subsidiary holds the patent and others pay a ryalty fee to the holder to use it
a real world scenario of this?
That's a hard question, mostly because of disclosure rules. Typically what your asking about is going to show up as an internal transfer cost for the producing subsidiary (typically rolled up into COGS as an overhead cost) with a matching transfer revenue to the subsidiary that holds the patent. Companies are under absolutely no obligation to disclose how they allocate their overhead for subsidiaries. In fact under the consolidation rule they are under no obligation whatsoever to disclose financial statements for those subsidiaries (unless there are minority shareholders: http://www.dummies.com/business/accounting/reading-consolidated-financi…) Furthermore the value of this is entirely subjective (you get to transfer price using a "market comparable" basis....and IP market value is not easily measurable) making it ripe for manipulating the earnings of each division/subsidiary within a conglomerate.
It also doesn't really impact your valuation. The question is how much the SUBSIDIARY is worth. I'd begin by asking "how much would they have to pay to get the same results if it were a standalone company ?" and begin expanding my train of thought from there.
i was hoping to get some real companies which i could use to show this (taking out multiples from bloomberg and showing that patent holder has higher) but its a fairly tricky exercise but was worth a shot i though. amnyways i do understand what youre saying.
bump
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