Handbook of Business Valuation and Intellectual Property
by Robert F. Reilly and Robert P. Schweihs
2004; ISBN: 0071429670; 600 pages; $99.95 (hardcover)
by Martin J. Lieberman
2005 - The Handbook of Business Valuation and Intellectual
Property Analysis features the contributions of 29 experts
from leading valuation, accounting, investment, and law firms,
and provides a comprehensive review of contemporary valuation
issues related to business, securities, and intellectual property.
Several chapters are updates of a previous anthology compiled
by the same editors, The Handbook of Advanced Business
new work’s main contribution is its recognition of
the importance of intangible assets in the information age.
It addresses the enormous complexities associated with measuring
the value of these assets in a practical context. This work
is truly for the experienced professional; however, the
novice can derive insight into this area as well.
has been an explosion of intangible assets, which now make
up the majority of many companies’ asset base. One
indicator of the value of intangible assets today is the
relationship between book value and trading prices for public
company securities. Prior to 1980, book value tracked security
prices. Today, security prices are, to a large degree, very
much in excess of book value. The reason is that accounting
rules do not permit the recording of intangible asset values
unless they have been purchased. The marketplace, however,
recognizes the value of intangible assets, and this is reflected
in security prices.
than half the book is devoted to valuation topics other
than intangible assets. The book is divided into six parts.
Part I explores traditional valuation issues, including
discussions of the elusive equity risk premium, minority
interest and marketability discounts, built-in gains taxes,
and S corporation valuations. Part II provides valuation
methodologies for certain specialized industries, such as
health care. Fairness opinions and the now-popular family
limited liability companies are also discussed. Part III
has an excellent chapter on identifying value drivers as
an important means of arriving at more “correct”
valuation conclusions. The exercise of identifying value
drivers and quantifying their impact on company value contributes
enormously to achieving credibility in one’s reports.
The practical application to real-life valuation assignments,
backed by theoretical underpinnings, is the hallmark of
these chapters, as well as of the entire book. The chapter
on quantifying economic damages is one that I found particularly
IV, V, and VI are devoted to intellectual property valuation
issues, methodologies, and case studies, from the basic
to the arcane. Part IV covers intellectual property valuation
approaches, methods, and discount rates. Part V focuses
on the estimation of transfer pricing, which is useful in
nailing down more than just transfer prices for such cases.
It also provides a methodology for constructing values in
other types of assignments, using acceptable transfer pricing
income tax methods as justification. Part VI describes research
techniques for economic damage issues, and offers a case
study. In most valuation assignments, finding data to support
a position is always challenging; finding inexpensive data
is even more challenging. The book provides resources for
hard-to-find databases such as royalty rates.
general, the book is a must for the serious practitioner
wanting to stay on the cutting edge. Certain controversial
issues are addressed and clarified, and there are enlightening
discussions of advanced topics. The book is intended to
tell the reader what is happening now in the evolving field
of business and intangible asset valuation. Although it
was published in 2004, certain not-so-recent changes in
the law are not reflected in the text. For example, the
chapter by Pamela Garland refers to patent life of 20 years
from issuance, but the law adopted in 2003 grants patent
life for 20 years from application date. Therefore, caution
is advised: The moving target of current law and thinking
cannot be solidly cast in any work of this size and scope.
The Handbook of Business Valuation and Intellectual
Property Analysis is a welcome addition to my library.
I recommend it to any serious valuation professional, as
well as to those just entering the field.
Note: Robert F. Reilly has authored several articles
for The CPA Journal, most recently “Sports Franchise
Acquisitions: Valuation of Intangible Assets” (October
and November 2003).
J. Lieberman, CPA/ABV, ASA, is partner and director
of business valuations at Rosen Seymour Shapss Martin &
Co., LLP, New York, N.Y. He is a member of the NYSSCPA’s
Business Valuation Committee.