Brand Valuation in M&A: What Buyers Should Actually Pay For

A brand valuation question starts with an accounting paradox. Brand Finance's 2025 tracker estimates that the intangible assets of the world's largest companies reached $97.6 trillion in 2025, up 23% on 2024. It also estimates that 83% of global intangible asset value is not disclosed on balance sheets. In its measure, intangible value is 78% of the US market, and Denmark's intangibility fell from 82% in 2024 to 67% in 2025 as pharmaceutical valuations moved. These are Brand Finance estimates, produced by a brand valuation consultancy with a commercial interest in the topic, and should be read as indicative.

The reason so much value is hidden is a rule, not an oversight. IAS 38, the international standard on intangible assets, states that internally generated brands, mastheads, publishing titles, customer lists and similar items are not recognised. A company that has spent decades building a brand carries it at nothing, while a company that buys the same brand records it at fair value. The acquisition is therefore the first moment at which the brand acquires an accounting number, and that number is set by the buyer's valuers and by negotiation.

The deal environment sharpens the issue. Bain & Company reported in December 2025 that global M&A value was projected at $4.8 trillion for 2025, up 36% versus 2024, while deal count was expected to rise by only 5%. Deals worth $5 billion or more contributed 75% of strategic deal value growth. Larger transactions concentrate attention on a few headline brands, and a mid-market buyer can find itself pricing against valuations set by very different deals.

For a CFO, the implication is that the target's balance sheet says almost nothing about its brand and relationships, and that published rankings and large-deal multiples are unreliable guides to a mid-market target. The valuation has to be built from the target's own commercial evidence.

What to do: before issuing an indicative offer, ask the deal team to list every intangible the buyer expects to recognise, the commercial evidence for each, and the amount of the price that depends on each. Treat any item with no evidence as goodwill.

Once a deal completes, acquirers must allocate the purchase consideration across identifiable assets and goodwill. The pattern in practice varies widely by sector. Houlihan Lokey's 2018 Purchase Price Allocation Study, which reviewed 2,428 completed transactions and analysed 715 with sufficient disclosure, found a median 41% of purchase consideration allocated to goodwill. This study is dated and covers one year, so it is a guide to structure, not a current benchmark.

By industry the medians ranged from 25% in energy to 51% in technology. Aerospace, defence and government was at 44%, industrials at 39%, consumer, food and retail at 37%, and telecom at 34%. In consumer, food and retail, customer-related assets took a median 15% and a mean 17% of consideration, while trademarks and trade names took a median 8% and a mean 14%. The gap between median and mean for trade names shows how unevenly brand value is recognised across deals.

The allocation matters beyond presentation. Amounts assigned to finite-life intangibles are amortised and affect reported earnings. Goodwill is not amortised under IFRS but is tested for impairment, and impairments are a signal that a buyer overpaid. Kroll's 2025 US Goodwill Impairment Study, covering over 8,000 listed companies, found that goodwill impaired in the US rose by about 16% from $83 billion to $96 billion in 2024, with about 67% concentrated in Communication Services, Consumer Staples and Healthcare.

Two practical consequences follow. First, a high goodwill share is a statement that the buyer has paid for things it cannot separately identify, such as synergies, assembled workforce and expected growth. Second, consumer and healthcare sectors, where brand matters most to the story, are also where large impairments have clustered. Brand-led premiums have to be defended after the deal, in annual tests, not only at signing.

Regional differences matter when the target operates across markets. Kantar's figures show that brand value at the top of the market is overwhelmingly American, and that European and Chinese brands hold far smaller shares. For a buyer acquiring a European or Gulf business with an international customer base, that suggests caution about importing US-derived royalty rates or multiples. A brand with strong recognition in one region may carry little weight in another, so the valuation should be built market by market and weighted by the revenue each market produces.

What to do: ask valuers for a pre-signing view of the likely allocation, including trade names, customer relationships, technology and goodwill, and run it through the earnings and covenant model. If the allocation changes the buyer's reported profit materially, the board should know before the price is fixed.

League tables are the most visible form of brand valuation, and the least useful for deal pricing. Kantar's BrandZ 2025 ranking valued the Global Top 100 at a record $10.7 trillion, up 29% year on year. The distribution is strikingly narrow: US brands comprise 82% of the total value, up from 63% in 2006, European brands account for only 7%, down from 26%, and Chinese brands for 6%. Kantar also notes that the world's most valuable brands have outperformed the S&P 500 and MSCI World Index over 20 years.

Those facts describe a market in which a few very large brands, mostly American and mostly in technology and retail, set the reference points. They say little about a regional services business, a specialist manufacturer or a healthcare group, whose brand operates in a narrower market with fewer customers and a different mix of loyalty. A buyer that borrows a royalty rate or a multiple from a global ranking is importing the economics of a different asset.

There is a second warning. Interbrand research, as reported by Medianews4u, claims that 67% of S&P 500 brands are mispriced in M&A contexts. We treat that as a secondary report whose method is not disclosed, but it points in the right direction: even among the most heavily researched brands, valuation is contested. If large listed brands attract disagreement, a private mid-market brand with thin data deserves more caution, not less.

The implication for a CFO is to use rankings for context, such as the sector's general intangibility and the direction of travel, but to anchor price in the target's own transactions. Where the brand is regional or niche, the market of comparable disposals is small, and the income approach based on the target's own earnings will carry most of the weight.

The distinction between a brand and the business it labels also matters for tax and legal structuring. Where a brand is owned by a separate group entity, licensed to operating companies, or registered in a different jurisdiction, the buyer needs to verify title, registrations, renewal dates and any licences that restrict use. Defects in these areas reduce the value of the asset directly and are often cheaper to correct before completion than after. Legal diligence on intellectual property should therefore be scheduled early, with the valuer and the commercial team working from the same fact base.

What to do: instruct advisers to disclose the source and the sample for any multiple or royalty rate they propose, and to explain why the comparator resembles the target in market size, customer type and competitive intensity.

A buyer might hope that the target's marketing team can supply the evidence. The 2025 Language of Effectiveness research from Marketing Week, with Kantar and Google, suggests otherwise. Of more than 1,000 brand marketers, just 40.3% agree they can quantify the relationship between brand strength and price elasticity. The share is 31.2% among B2B marketers, against 40.8% in B2C, 35.7% among SME marketers, and 41.3% among CMOs.

The figures mean that the evidence a seller offers about its brand premium is often assertion. B2B companies, which dominate the mid-market, are least able to quantify the link. That does not mean the premium is absent. It means that management may not have measured it, and that the buyer cannot rely on a presentation to show it.

The buyer's own tests should be hard and few. First, price realisation: does the target hold a price premium over comparable alternatives, and has the premium held through discounting cycles and cost inflation? Second, acquisition cost: does the target win customers at a lower cost per customer than competitors, and does the gap persist by channel? Third, preference: do customers choose the brand when the price is equal, and does it win a higher share of tenders? Each test can be run from invoices, CRM records and win-loss data in diligence.

These tests also protect the buyer from paying twice. A strong brand may show up as lower acquisition cost, which raises margin, while the same effect is counted again in a high customer relationship value. Separating the contributions requires clear definitions and a consistent period. Without them, a forecast can credit the same economic advantage to the brand, to the customer list and to synergies.

Another common error is to treat brand tracking scores, such as awareness or consideration, as proof of value. Awareness is necessary but not sufficient: a brand can be well known and still compete mainly on price. The buyer's analysis should always ask what the score translates into at the point of purchase. A target that can show higher conversion at equal price, or lower discounting at equal volume, has evidence. A target that shows only attitude data has an argument that still needs testing.

What to do: write a short brand evidence request into the diligence list, asking for invoice-level price data, cost to acquire by channel, win rates, and customer retention by cohort. If the seller cannot provide them, adjust price or structure the consideration so that the buyer does not bear all the risk.

In many acquisitions the asset a buyer most wants is access to customers, and the brand is the visible label on that access. Purchase price allocations reflect this: in Houlihan Lokey's 2018 sample for consumer, food and retail, customer-related assets took a median 15% and a mean 17% of consideration, a larger share than trademarks and trade names at a median 8% and a mean 14%. The point is not the precise figures, which are dated, but the ordering. Customer relationships often carry more allocated value than the brand name itself.

That ordering should shape diligence. A customer relationship is valuable to the extent that it generates repeat revenue with predictable margin and low cost to serve. Evidence comes from cohorts: how much of the revenue from customers acquired in each year remains in each following year, how many have contracts and for how long, how concentrated revenue is in the top accounts, and what share of new business comes from referrals. Those data separate a durable relationship base from a collection of one-off sales.

The brand's contribution can then be isolated more cleanly. If customers stay because switching is costly or because the contract is long, retention is a feature of the relationship and the contract, not of the brand. If customers return because they prefer the brand, in a market where switching is easy, the brand is doing the work. The distinction affects both the valuation method and the integration plan, since changing the brand after the deal is far riskier in the second case.

Founder and key-person effects belong here too. In professional services, healthcare and specialist B2B businesses, the brand is often a person. A buyer should test what proportion of revenue depends on named individuals, whether restrictive covenants are enforceable, and whether the relationships are held by the firm or by its staff. Stout's Q4 2024 review of 183 transactions found non-competition agreements accounted for 3.8% of intangible assets in the 14 deals that recognised them, a reminder that such protections are valued at a small fraction of the total.

Sector context changes the weight of each test. In consumer categories, price realisation and repeat purchase tend to carry the story. In B2B and professional services, tender win rates, referral share and the length of the sales cycle are usually more revealing. In healthcare and regulated services, trust and clinical reputation affect both price and acquisition cost, but regulation can cap what a provider may charge. A valuation that ignores these differences will misread what the brand is doing for the business.

What to do: request cohort retention data for at least three years, a customer concentration table, contract terms, and a list of relationships by owner. Use them to decide which intangible assets are separately identified and which are captured in goodwill.

Valuers have an international framework. ISO 10668, the standard for monetary brand valuation, specifies three alternative approaches: the market, cost and income approaches. In practice, the income approach dominates deal work, usually through a relief-from-royalty calculation that estimates what the owner saves by not having to license the brand, discounted to present value. The market approach relies on comparable brand transactions or licences, which are scarce at mid-market scale. The cost approach, based on what it would cost to recreate the brand, is a floor and not a price.

Each approach has a weak point that a CFO can probe. Relief-from-royalty depends on the royalty rate, the forecast revenue and the discount rate, and small changes in all three compound. The market approach depends on the comparability of the licences chosen. The cost approach ignores the time and risk of building a reputation. A valuation that relies on one method with undisclosed inputs is a negotiating position, not an independent view.

We would ask for a triangulated range, with sensitivities. The report should show a base case and the effect of changing the royalty rate by a stated amount, the discount rate by a stated amount, and the growth assumption. It should state which assumptions come from the target's data and which from external benchmarks, and it should reconcile the brand value to the enterprise value so that the total of the intangibles does not exceed the price paid.

Mid-market deals add practical constraints. Data are limited, advisers are cost-conscious, and timetables are tight. The answer is proportion, not abandonment. A focused analysis of price, acquisition cost, retention and a sense-checked royalty range can be completed within a normal diligence period, and it will improve both the price and the post-deal allocation.

Buyers sometimes overlook that valuation should reflect the value to this buyer, not the value in the abstract. A strategic acquirer with an existing sales force may extract more from a customer base than a financial buyer would, but the incremental value is a synergy, and the seller will seek to be paid for it. Keeping synergies separate from the standalone brand and customer value makes the negotiation clearer, helps the allocation, and prevents the buyer from paying away value it will have to create itself.

What to do: commission the brand and customer valuation at the same time as commercial diligence, so the two share data. Ask the valuer to present a range, to list the three inputs that move the answer most, and to state which are evidenced and which are assumed.

Once the evidence is gathered, the buyer has three levers. It can adjust the headline price to reflect only the brand value it can evidence. It can defer part of the consideration through an earn-out tied to measures the brand should influence, such as revenue from existing customers, gross margin or customer retention over two to three years. Or it can protect itself through warranties, specific indemnities and escrow for risks identified in diligence, such as key-person departure or loss of a major account.

Earn-outs deserve care. They align incentives when the metric reflects what the seller can influence and the buyer will not change in integration. They create disputes when the buyer rebrands, merges sales teams or reallocates marketing budgets that affected the measured outcome. Metrics, accounting policies and operating covenants should be specified in detail, and the integration plan should be drafted before the earn-out is agreed.

The brand decision itself should be made before signing, not after. A buyer that intends to retire the target's brand should not pay for it as if it will continue, and should instead value the customer relationships and transition risk. A buyer that intends to keep the brand should budget for its maintenance, since a bought brand that is starved of investment loses value quickly. The integration plan, the valuation and the price should tell the same story.

The Kroll evidence on goodwill impairments is the final check. With $96 billion of goodwill impaired in the US in 2024, and impairments clustered in sectors where brand carries the investment case, a buyer paying a brand premium should record the assumptions that justify it and the metrics that will show whether they are holding. Doing so at signing makes later impairment testing faster and more credible.

What to do: write a one-page brand thesis for the investment committee that states the evidenced value, the premium over it, the rationale for the premium, the measures that will track it, and the decision on the brand's future. Update it at each annual impairment test.

Karter McKinley supports acquirers through our M&A and Corporate Development service. We help finance and deal teams design the commercial diligence that tests price, acquisition cost and retention, coordinate work with valuation and legal advisers, and prepare the integration and brand decisions that sit behind the price. We support the process alongside appropriately qualified professionals and do not provide valuation opinions or investment advice.