04 / May 2012

Disney’s release of Marvel’s The Avengers will begin an informative case study on IP as a value-driver

Posted in: Intellectual Property News Written by: Randy
Categories: intangibles intellectual property licensing purchase price allocation royalty trademark
Tags: financial reporting for IP intangible property intellectual property M&A investing in IP IP management IP strategy IP valuation research IP value comparables & research purchase price allocation royalty agreements royalty rate trademark value

On August 31, 2009, Disney entered into an agreement to acquire Marvel Entertainment, Inc. in a merger transaction worth $4.2B.  In the purchase price allocation (see below), Disney revealed it valued identifiable intangibles (primarily the IP associated with the Marvel characters) at 54% of the total assets acquired, and total intangibles (including Goodwill) at over 90% of total assets.

This was the purchase of a brand, and its attendant IP. In a 2009 Q&A, Disney CFO Tom Staggs defended the dilution of Disney stock that resulted (58M shares), saying Disney expected synergies in films, consumer products, video games and publishing, all related to the recognizable Marvel brand. Disney was paying a premium for the brand, but the investment would yield substantial benefits in all Disney business units. “[Marvel is a broad set of properties to which we can apply this integrated business model, and I think over time really benefit from our ability to grow the business, much more broadly than just in film”.

The Marvel brand had never really been exploited. Its film agreement (with Paramount) and its existing licensing agreements focused on the characters.  With today’s U.S. introduction of the film, Marvel's The Avengers, we will see the Disney hydra-headed marketing machine in action.

  1. Tying the Marvel name to the movie title is working.  Almost all of the movie theaters and web move-time-listings services are adding the Marvel name to the title of the movie;
  2. Licensees are lining up, from the logical (Hasbro,) to the not-so-likely, Wyndham and Harley Davidson;
  3. Disney expects licensing revenues to exceed box-office revenues (a look into ktMINE, the license and royalty rate database, reveals 9 pre-Disney Marvel licensing agreements with an average royalty rate of a hefty 8.3% of net sales);
  4. International sales are expected to set records.
Purchase Price Allocation
Cash and cash equivalents   $

105
Accounts receivable and other assets  

141
Film costs  

269
Intangible assets  

3,140
Goodwill  

2,115
   
Total assets acquired  

5,770
Accounts payable and other liabilities  

(325)
Deferred income taxes  

(1,121)
   
Total liabilities assumed  

(1,446)
Noncontrolling interests  

(83)
   
  $

4,241
   
Intangible assets primarily consist of character-based intellectual property with an estimated useful life of approximately 40 years.

Filed for the Quarterly Period Ended

January 2, 2010

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