Brand Valuation

Question 0

How you’d do relative brand valuation?

Answer 0

Find all EV/something ratios for both branded and generic companies and use the excess ratios by multiplying with relevant SOMETHING
Find the average from all these extra EV attributed to brand
Done!!!!

Question 1

How you value Brand?

DCF method

Answer 1

Basically you estimate the brand in 4 different ways then take the average.

There formula for V, something look similar like DDM usually 2-stage (because it tailored to exam)
Instead of div1, EBIT(1-t)• (1-b) used and we get to play with EBIT(1-t) part with 4 different ways.
We need to find V first, for that we would need g of high stages (ROW•b ~ ROIC•b) and stable stage and the b of stable stage it is g stable divided by WACC

1. Margin approach
   Sales•EBIT(1-t)margin - basically replacing generic comps margin to the brand company equation
   Remember to calculate g every time, cause when margin changes g changes as well
2. ROIC approach
   ROIC•BV of invested capital=EBIT(1-t) - basically we replace generic comps ROIC to the branded company equation
   Remember growth of high stage changes here again
3. Excess return
   Find generic comp’s excess ROIC over its WACC and use this as an branded company’s excess. So add on to our WACC, again high stage g has to be calculated
4. All excess
   Basically think that there is no comp, hence get rid of all the excesses over WACC and use it to find our high stage g

Question 2

What should you have to have when using brand valuation methods?

Answer 2

You need to calculate
g - high growth stage
b - low growth stage
WACC calculation be careful debt/market value of entire firm

And each time you change your margin or ROIC then you must adjust the corresponding g -high stage as well