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Egg.Com: Pricing a Bank’s Intangible Assets

In 2005, we were asked to value the intangible assets of a relatively new but rapidly growing bank based in the United Kingdom. The context of our assignment was to enable our client, the potential purchaser, to make a rational decision as to what price to offer for the bank and its assets. Among the tasks included in this project was to quantify any possible brand extensions into new product and service categories. At the project’s initiation, the company was involved in providing consumer loans, savings and demand deposit accounts, and limited investment services. They had an existing customer demographic that was much younger, more tech-savvy and more urban than any of their competitors. While they had experienced significant growth in their relatively short life, there was still plenty of room for growth, both in absolute terms and in terms of market share. This was an unusual assignment because it involved the acquisition of a British bank by an overseas (American) purchaser. The intangible assets primarily consisted of the brand and the associated intangible assets, ranging from internet to brand extensions.

Several brand extension opportunities were identified, including credit cards, various forms of insurance, additional investment products such as mutual funds and annuities, tax advice, and various real estate and concierge-type services such as escrow, home security, and reservations. In addition, expansion of the core business into additional market segments was to be quantified. Finally, the value of potential licenses and alliances with various partners was to be explored.

Most interesting also was that this financial institution had no bricks or mortar presence. It purely was and is an online bank – officially named – with all of its clients working with the bank via internet connections. Our specific focus was to determine the incremental value of the intangible assets above the value of the purely financial portfolio of assets. In other words, the issue to address was what sort of premium should the buyer pay above the financial assets of, to reflect the value of the brand and associated intangibles? The assignment is summarized as follows:

  • The project – to value the trademark and brand assets
  • The key task – identify all brand related assets
  • Review appropriate brand valuation methodologies
  • Establish value for each brand related intangible asset group
  • Final work product – determine core brand asset value
  • Identify additional intangible asset value opportunities

Upon approaching the valuation portion of the assignment, we looked at the traditional ways of valuation methodologies, including the market approach, the cost approach, the income approach and the relief from royalty approach. In addition, we considered some proprietary techniques that have been in use for more than two decades. The analyses of the individual bundles were performed utilizing several different methodologies, including Market, Cost, Income, and Relief from Royalty. The results of these individual asset category analyses then served as the basis for the Brand Value Equation analysis, which served to aggregate the results into a comprehensive whole. In the final event, we elected to use the components of value approach, or as we refer to it, the Brand Value Equation methodology. That approach to valuing the assets can be briefly summarized as follows:

  • Identify multiple components of value within for various intangible asset groups;
  • Bundle the intangibles into discreet components of value;
  • Value each component or bundle;
  • Value the core brand; and
  • Add each of the component values together in an equation as follows:

CBV + IVE1 + IVE2 ++IVEN = Total Brand Value

Exhibit VI-9 illustrates the components of value:


The core brand value bundle consisted of the trademarks, logos, trade dress, etc. Often, and particularly with well-known trademarks and brands, the most appropriate method for valuing these core brand assets is the relief from royalty approach, which incorporates revenue projections and actual market data in the form of comparable product royalty rates. In the relief from royalty approach, value is calculated based on cost avoidance: What would the potential buyer have to pay for use of the assets they do not already own?

Revenue projections for isolated revenues by product line and utilized different growth rates for different lines, based on historical activity as well as on current management’s future projections for revenue by product line, (e.g., projections for products such as the Egg credit card, included all revenue sources). Appropriate market royalty rates were then identified from our proprietary database of 13,000+ transactions and an appropriate royalty rate range was then selected. Exhibit VI-10 identifies the concluded royalty rate ranges for each of the business segments using the brand assets.


Using the revenue projections described immediately above, we applied the appropriate royalty rates from Exhibit VI-11 to each of these activities using the Egg brand assets. We identified each of the business segments, the appropriate royalty rate applied to each of those segments, and the concluded value for each segment. (Note that the figures in the value conclusion have been changed to maintain confidentiality).


Having calculated that the core brand value for the bank was approximately £283 million, the next step was to identify any additional intangible assets or brand value elements and to quantify their value where possible. The opportunities to extend the brand and Egg banking functions were substantial. Egg has both a broad range of service opportunities as well as a number of untapped market segments, both ethnic and geographic as well as international. In addition, there were multiple opportunities for extensions of the brand and other services via licensing and new products, brand extensions, alliances, and cash-generating relations with infinity groups – in other words, the brand was considerably under-leveraged and had a substantial amount of untapped value potential locked within the family of intangible assets. We proceeded to group and triage these opportunities, focusing on the half-dozen groups of incremental value that held the greatest promise. Exhibit VI-12 identifies the additional Egg brand value elements.


Because this is a summary case study, we can not hope to go through the process of identifying every value element and then illustrating the actual valuation process itself. Instead, below we review items two, three, and four from the exhibit above – the learning laboratory, new products, and license brand extensions.

From the prior exhibit, we see that the incremental value element number two was the learning laboratory/marketing model that was proprietary to and the Egg bank. This marketing model is unique and very attractive to large financial institutions on both sides of the Atlantic that increasingly need to adapt and expand their online banking model. The learning laboratory/marketing model was built on the concept of one-to-one marketing with each individual customer within, and they had built an effective software model that allowed the bank to communicate virtually on a daily basis with sub groups of customers within the Egg banking network – customer groups as small as five or six people would receive customized marketing messages on a daily or weekly basis. It is one of the best adaptations of a successful online banking model, and is one that took millions of dollars and years to develop. One of its most important elements is its very efficient conversion of target market prospects into banking clients. Finally, this marketing model incorporates and codifies a very efficient and consistent branding model. Valuing this asset was undertaken using the cost methodology – the cost to develop an equivalent business model and technique if our client, the potential acquirer, was unable to purchase Exhibit VI-13 that follows is a summary of the learning laboratory/marketing model. One will note that there are three sub-elements within the model, and each was valued separately. The total potential value of this particular incremental value element was approximately $60 million.


We next look at new products and internal product line extensions using the facilities skill sets and management team existing within the bank. Among those product extensions were some obvious ones such as debit cards and money transfer facilitation, as well as less obvious product line extensions including annuity products, share brokerage, and ATM machines. Exhibit VI-14 below shows the major elements of this third incremental value element.


As a final example of an incremental value element, we also looked at potential licensed brand extensions. These included real estate services such as title and escrow; tax services; share brokerage services, (e.g., Charles Schwab); as well as various types of security and insurance offerings. Finally we looked at less obvious brand extensions such as providing a travel and booking service, as well as a reservations and concierge service using the internet and website assets of


One will note that in both Exhibit VI-14 and Exhibit VI-15, values are not given for either of those elements. The process of valuing these intangible assets was complex and detailed and would require far more time and space than this brief case study would warrant. In total, these added another £70 million in value.

Once the entire valuation project was completed, it became clear that the upside potential for the brand was extraordinary. These additional benefits were associated with new product introductions, licensing of the brand to third parties, and forming strategic alliances that utilized the very strong brand attributes. Clearly, the incremental opportunities add significant value to the brand, and a transaction based on the core brand value would provide a basis for substantial returns on investment going forward.


In summary, we were able to value not only the core brand but all of the other intangible assets of the brand asset family. Exhibit VI-16 summarizes the values for the important asset groups. It is interesting to note that the core brand value of approximately £2.83 million is probably exceeded by the value of all the other incremental value elements in total. It shows that a well managed brand and a financial institution, with intangible assets that are meaningfully supported can add substantial value to the overall purchase price of the company. In other words, the value of the intangible assets of, both core brand and incremental value elements, totaled well over £500 million in value. This amount represents the minimum premium that the acquirer should have been willing to spend (above and beyond the value of the financial portfolio and financial assets), to acquire


As the case studies in this section have shown, there are always intangible assets in any corporate entity or personal estate, and the accurate identification, valuation, and value extraction policies are critically important in most companies and environments today. As we move to the concluding part of this handbook, we urge the reader to consider each of the projects, deals, corporate environments or client assignments upon which they are pondering – and consider each of those from the viewpoint of an intangible asset base. What are the intangible assets? How can I arrange them? Do they have value and can they be made more useful? Finally, the case studies serve as a reminder that each company and environment is different. And particularly true with intangible assets, different and unique approaches to each environment must be developed.

[1] Amounts altered to preserve confidentiality.