Business Valuation and Valuation of Intangible Assets
Our business valuation expertise is most frequently engaged by clients that are embroiled in a dispute that is or could possibly be resolved through litigation. Following are several project descriptions that highlight the scope of our experience.
Valuation of Trade Secrets / Software Development:
ResX quantified the value of a trade secret contained within a bundled software product by relying on usage statistics to allocate revenue to the trade secret in question. The adverse expert, who was a partner from a global consulting firm, used a GAAP based revenue recognition theory to calculate the value of the bundled trade secret. The plaintiff paid over $500,000 for the analysis prepared by the global consulting firm. The attorneys for our client prepared a motion in limine, based on our valuation theory and our critique of the adverse expert's theory. The Court ruled that the global firm's expert theory was likely to confuse the jury and barred the adverse expert from testifying. Click here to read the Judge's ruling.
Trademark Valuation – National Retailer's Primary Trademark:
We were engaged by a nationally known retailer to determine the value of its flagship trademark that was allegedly misappropriated. The retailer had spent over $50 million in advertising that tied this trademark to its overall brand image. Our valuation was for the purpose of determining the value of the trademark if the Court ruled that the retailer had in fact infringed on someone else's trademark. Since it was being alleged that the retailer was using a trademark that was owned by another entity, it was critical to determine the date of the alleged first infringement. This was because the date of first infringement was also the appropriate valuation date for purposes of determining the damages due the plaintiff. Additionally, since the date of the first alleged infringement occurred before the retailer invested over $50 million in advertising the trademark, the damages allegedly suffered by the plaintiff were significantly less than the damages being claimed.
Business Valuation – Shareholder Oppression
ResX was engaged to help separate two sister construction companies whose common owners were in litigation for the purpose of severing their business relationship. These companies had historically shared management, equipment, and markets. Therefore we had to adjust each company's financial data to reflect the expected performance as a standalone company. We then determined the present value of each company's projected cash flow and then adjusted this PV to determine the fair market value of equity.
Business Valuation – Entertainment Venue:
ResX was engaged to forensically analyze and then value eight separate entertainment venues located in several Midwest States. Each venue was a separate corporate entity that had the same owners but with varying percentages of ownership interest. We were engaged by one owner who had controlling interest in some venues and non-controlling interest in others. Our purpose was to first determine if the individual venues were being overcharged for services provided by the central management group, and if so, by how much. We then adjusted the financial statements of the venues effected by the overcharges and used the corrected financial statements as a basis for projecting future cash flow. Finally, we determined the Fair Value of each venue. Our study results were presented in an arbitration triggered by our client and because the foundation for the settlement that was finally negotiated.
Business Valuation – Construction Company:
Our client was the sole owner of a general contractor / construction manager doing about $100 million in business per year. He was negotiating with a potential buyer of his company. The buyer was a service provider engaged in a national expansion program. The buyer wanted to secure in-house construction expertise to hedge against the risk that its expansion would be hindered due to the future cost of securing construction expertise in the open market. Based on this knowledge, we valued the construction company using a synergistic purchase price theory which allowed the owner to understand the real value of his company to the potential buyer.
Business Valuation – Construction Company:
ResX was engaged by a large supplier of construction materials. Our assignment was to 1) conduct a forensic analysis of the historical accounting records to determine if shareholder oppression had occurred, and 2) determine the value of a 30% equity share using the Fair Market Value as the standard of value. We also prepared an analysis of the 30% shareholder's expert's valuation report. Our analysis identified numerous issues underlying the adverse expert's report, including 1) use of multiples, from allegedly comparable transactions, that were erroneous because they were not adjusted for the 2018 tax law changes, and 2) unsupported modifications to the company's gross margin that incorrectly inflated the value of the plaintiff's equity holdings.
Business Valuation – Value of Celebrity Endorsement:
We were asked to determine the value of a famous celebrity's name on a bottle of perfume. The purpose of this analysis was to determine the potential damages suffered by a claimant that allegedly had a contract to use the celebrity's name on a perfume product. The claimant's alleged contract did not have any other contractual rights such as the right to public endorsements, or the right to use the celebrity in print or television advertising. Our analysis proved that the right to use the celebrity's name on a product was virtually worthless without the celebrity's endorsement in personal public appearances or in advertisements. Facing this analysis the claimant settled his claim for a very small fraction of the original claim.