Brandstock interview: brand valuation at BASF

07-03-2017

Hans-Jürgen Lutz

Brandstock interview: brand valuation at BASF

mattjeacock / iStockphoto.com

Hans-Jürgen Lutz, vice president, marketing communication, brand and trademark management crop protection at BASF, answers questions about the value of trademarks to one of the largest chemical companies in the world.

Corporate success is closely linked to the prestige and value of a company’s trademarks. Value-based brand management plays an increasingly significant role in strategic decision-making processes. However, national and international statutory accounting requirements prohibit capitalisation of internally-generated brands, ie, carrying them as assets on the balance sheet.

This means that the considerable value and potential of an asset fails to be realised and is doomed to be itemised as undisclosed reserves. How important are trademarks to one of the largest chemical companies in the world? What are the advantages of a trademark that has been valued? How can this monetary value be efficiently and strategically used? Hans-Jürgen Lutz from BASF answers our questions regarding these essential issues.

Brandstock: How important are strong brands in your sector and what are the advantages?

Lutz: At BASF we consider trademarks of paramount corporate significance. Brand recognition and a unique selling proposition are of critical importance in our market. The agricultural sector is very much driven by technical developments, which means that every product sale is closely linked to a value proposition, to customers, and consequently to the brand. For us, the brand represents a medium through which we fulfil the performance promise and value proposition we offer with our brands—both externally (the farmer) and internally in the creation and development of the brand in order to link the unique selling proposition and the transferred values to the brand.

Brandstock:How important is it from an internal and external point of view to convert a brand into monetary value?

Lutz: Monetary valuation is becoming increasingly important. This is particularly true if we consider the lifecycle of a product: you have spent decades creating a positive image of a brand and establishing it on the market; various factors relating to the specific sector or environment, or even market regulation, can require changes to the product (eg, new formulations, components, mixtures, etc).

You either develop a new brand at this stage because the next production stage is a new development, or you use the existing brand and—in a different form—benefit from the trust and confidence in our products that have been built up over the years. One of the key performance indicators in this strategic decision is the monetary value of the brand. The central issues here are:

1)  Can the sale of the brand generate liquidity for the creation of a new brand?

2)  Is the brand so strong and valuable that it can be kept and possibly used for new products? How flexible is the brand (brand extension strategies)?

3)  To what extent would acquisition have a positive impact on the competitive environment? What would be the negative impact on your own portfolio?

Designing and establishing a new brand involves an enormous investment in time and cost and is not without an element of risk (creation, registration, marketing material, etc). The energy required increases continually, and by using an established brand, these costs can be avoided. As consumer trust in products needs time to be developed and is also an expression of the brand, it is clear that a new brand will also require a certain amount of time to establish itself. Potential purchasers of the shell of a brand are aware of this and can save time and money, as well as acquiring the confidence in a product that has built up over the years, and they do not have to take additional risks.

Under the integrated BASF process, when a crop protection brand is to be sold, the first requirement is to obtain an objective valuation on which the negotiations can be based. Integrating trademark valuation is a new learning process that is to become established in the organisation. I believe that the added value and return on investment that such value orientation generates will swiftly become apparent, particularly if it proves successful.

Brandstock: Does monetary valuation increase the purchase price of a brand?

Lutz: I am convinced that a well-founded, substantiated valuation can create a stronger position in sales negotiations and also boost the purchase price. In addition, an expert valuation of a brand can be extremely relevant within the company as it can serve as a basis for negotiation strategies and corporate decisions regarding the question of whether a brand should be sold.

Brandstock: Do you think that brand valuation could serve as a bridge between marketing/brand management and financial controlling?

Lutz:Absolutely. The findings create a basis for discussion and give the brand a value, making it more tangible. Consequently, marketing language takes on economic considerations for our financial controllers and is transformed into a monetary dimension or factor. The controller is very interested in this value, which is not usually itemised on the balance sheet. These factors, in addition to the controlling, then provide us with well-founded and plausible arguments to justify our decisions internally and strengthen them externally.

“A WELL-MANAGED COMMERCIALISATION PLATFORM CAN BE A VERY EFFECTIVE TOOL TO SELL BRANDS THAT THE OWNER NO LONGER NEEDS.”

Brandstock: Could the active commercialisation of unused brands be an alternative form of exploitation to portfolio adjustment?

Lutz: A well-managed commercialisation platform can be a very effective tool to sell brands that the owner no longer needs. It opens up the opportunity to adjust the portfolio and gain additional liquidity. Further, such an actively-managed platform gives an insight into market feedback and helps determine whether the market is even interested in acquiring this brand.

Even if some individual brands no longer fit into our crop protection portfolio, we have recognised that they still fetch a very high monetary value on the market. If products are no longer sold for strategic reasons, the brand does not have to die automatically with the product. When we own a brand but no longer own the relevant product, or if we no longer wish to sell such a product for strategic reasons, then we check whether we would be facing a risk by selling the brand and, if so, what that risk would be. This exploitation process is currently being established. In addition to various strategic decisions that have already been mentioned, brand valuation is an essential element.

Brandstock: Has the cooperation with Brandstock Valuation been to your satisfaction so far?

Lutz: We were more than satisfied with the professional cooperation and valuation. The content of the valuation report was very comprehensive and we were able to use it within the company. During the entire valuation process Brandstock worked closely with BASF. We look forward to a successful business relationship and an unbiased market-oriented approach to valuation.

Brandstock bidding platform

Brandstock was the first company worldwide to develop an active bidding platform for trademarks. An exclusive circle of purchasers is invited to submit, via an internet platform, an offer for a brand that is on sale (see Figure 1).

How does it work?

  1. Send Brandstock all of the relevant information regarding the brands that you wish to sell.
  2. Brandstock initiates a first screening—on the basis of which a report with all relevant information is prepared for each brand.
  3. Using, among other things, its information network, Brandstock identifies a longlist and shortlist with potential buyers of the brand.
  4. These potential buyers are then invited to participate in an exclusive, closed bidding process.
  5. On this bidding platform, a potential buyer can see all the necessary information regarding the brand in question and submit an offer. During this process, Brandstock is available at all times as a contact.
  6. All bids are collected at the end of the bidding process and transmitted to the client (ie, the party selling the brand). The client decides whether to accept the bid and enters into negotiations with the prospective buyer.

Figure 1: The process for selling a brand

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Brandstock Valuation GmbH
Rückertstrasse 1 80336 Munich Germany
T. +49 89 544 936 0 F. +49 89 544 936 20

valuation@brandstock.com

Hans-Jürgen Lutz is vice president, marketing communication, brand and trademark management crop protection at BASF.

Hans-Jürgen Lutz, BASF, Brandstock, trademark, brand, brand valuation,

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