ABSTRACT
This chapter focuses on the rationale behind the market-based approach and its limitations. Given the difficulty in isolating the value of a brand from the value of other assets in the prices paid for acquired companies or in the prices of listed companies, we consider that this approach cannot be used to value brands as such. It may only be used in rare cases to cross-check the brand value obtained using other valuation methods. Many data providers track the trading multiples of publicly listed companies. The current share price is often divided by either the last twelve months (LTM) or forecast earnings per share for the next year (FY1) to arrive to price-earnings or P/E ratios or by the per share book value of equity to arrive to price-to-book or P/B ratios. Many financial data providers e.g., Thomson Reuters and Bureau van Dijk, have specific databases of mergers and acquisitions from which transaction multiples can be collected.
