Data Driven Decisions

Chapter 4Defining Intangibles

Now let us talk specifically about defining intangibles within different corporate finance scenarios. These can broadly be defined as valuation, expansion, or commercial. The commercial scenario is the most simple and obvious of the three. What does your customer care about? You sell watches. You sell software. You sell chessboards.

Your customer wants a watch that meets their needs, whether it is a luxury, high‐brand‐value, or an economic need that simply tells the time when they are working a nine‐to‐five work shift.

Your chessboard customer is looking for either an artisanal brand or something that is functional so that they can teach their children how to play chess. A customer that is looking for software is looking for a computer‐based solution that meets very specific needs, which is, of course, dependent on their industry.

That is the commercial impact of intangibles, and that is a commercial scenario. The person that the intangibles matter to, in this example, is your customer.

Defining intangibles within a corporate valuation setting largely falls into the category of investment banking. This can include the buy‐side and the sell‐side of investment banking. When I use the word investment banking here, I am specifically talking about mergers and acquisitions (M&A) and, in some cases, some kind of capital placement. I will ignore underwriting, and I will ignore sales and trading, which are both very large and highly lucrative areas of investment ...