The main focus of our practice at Blackbird Asset Services is clearly in the machinery and equipment space selling and valuing (primarily) industrial assets. However, there are often times in this business where intangible assets such as patents, trademarks, licenses and even customer data come into the equation. Many an instance has unfolded where “hidden” value was unlocked by the sale of an intangible asset that almost went unnoticed. In other instances those assets aren’t so hidden.
RadioShack, a stalwart of American electronics retail stores, filed Chapter 11 in February 2015 after a long period of financial distress. Once a bastion of the do-it-yourself radio and electronics era, RadioShack had simply failed to keep up with the trends of the new millennium. Last month a deal was finalized for Standard General to purchase the remaining assets of RadioShack for $26.2 million. This includes the RadioShack name as well as the data for 67 million customers.
That’s a lot of data and a lot of money, so how do you put a price tag on customer information? Well, there are various ways to value an intangible via any number of financial methods. One method would be to estimate the cost associated with acquiring or replacing the information, aka “if I lost this data, how much would it cost to get it back.”
You can also use an “economic value” model which estimates how the intangible itself contributes to the revenue of the organization. For instance, Kroger supermarkets sift through 55 million loyalty-card members buying patterns, then share that information with its vendors (for a fee) so the vendor can stock Kroger’s shelves with products relevant to their customers. It’s estimated that Kroger brings in $100 million annually for the sale of this information—and its payment for helping their vendors better their customers Kroger shopping experience. This is a very crafty and profitable use of an intangible.
Then there is the market value of the data. There are many companies that specialize in selling intangible assets, via auction or other methods. Finding what a seller is willing to pay is a great way to accurately value the intangible, but the only caveat is (like any asset) the more specialized your intangible is, the smaller the market becomes. Provided you can find data on prior sales of similar intangibles, this data can be used as market comparable ("comps") for use inestimating a value for your subject intangible.