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In continuation of our discussion in the valuation of brands, we focus our attention this week on the “Multi-Period Excess Earnings Method” (MEEM). If you missed our blog last week, you can access it here.
As previously noted, a company’s brand may involve more than just a name; some other examples include trademarks, trade logos, websites and URLs, recipes and product formulas, marketing materials and packaging items (trade dress). Given the possible range of components that make up a brand, this gives rise to various valuation methodologies used in determining the value of a brand. The two most common methods used for valuing brands are the “Relief-from-Royalty Method” (RFR) and the “Multi-Period Excess Earnings Method” (MEEM), both of which are widely used income-based valuation approaches.
MEEM is a variation of the discounted cash flow method and is often used when it is difficult to obtain a direct measure of the future economic benefits associated with a particular intangible asset. As such, the steps to MEEM are as follows:
Some common advantages and disadvantages of using the MEEM method are as follows:
As in all cases, the valuation of a brand requires significant judgment and experience in order to attain a meaningful result. In addition, the valuator should always consider other factors that may impact the value of the brand and reflect this in their valuation.