Massive British American Tobacco deal sets brand value record

In its latest annual report, British American Tobacco (BAT) recorded the value of the assets purchased in its July 2017 acquisition of Reynolds American. In new analysis, Trademark Comparables AG has revealed that the cited $93.6 billion figure makes it the highest ever recorded brand acquisition.

BAT’s 2017 acquisition of Reynolds American saw it take such brands as Newport, Pall Mall, Camel, Natural American Spirits, Grizzly and Kodiak under its corporate umbrella. The deal was a notable one, bringing three of 2017’s most valuable tobacco brands (Pall Mall, Camel and Newport) into BAT’s portfolio.

However, according to Trademark Comparables AG, the deal was also significant for a number of other reasons. First, it set a new record for the recordal of brand value on a financial statement – more than doubling the previous record, held by Kraft Heinz Co for its $41.3 billion 2015 acquisition of Kraft Foods. Second, the ratio of brand value to brand revenue is one of the highest ever reported. Finally, the 89% ratio of brand value to overall enterprise value indicates that “there were hardly any other assets other than brand within this acquisition”.

In 2005 the acquisition of Gillette by Procter & Gamble marked a then record high in terms of the reporting of the value of acquired brands ($25.6 billion). In the following decade the market for brand-focused mergers flattened out. However, over the last few years there has been a bounceback, with 10 of the 20 most valuable brand acquisitions reported since 2000 occurring between 2014 and 2017.

Whether BAT’s new record will be beaten any time soon remains to be seen. However, while high-value patent deals tend to grab the headlines in the IP press (and beyond), the BAT deal – not least due to the inherent brand value to enterprise value ratio – stands as a potent reminder that brands represent an equally powerful monetisation tool.

The 20 most expensive brands acquired since 2000, as reported on the Markables database, are as follows.