Brands on the Balance Sheet

The debate about the value of brands became the driver for the recognition of intangible assets on balance sheets around the world. In 1988, Rank Hovis McDougall (RHM), a leading British food group listed on the London stock exchange, recorded its non-acquired brands as intangible assets on its balance sheet in a defense against a hostile bid by Australian takeover specialist Goodman Fielder Wattie (GFW). The bid came at a time when value focused investment vehicles exploited the value gap created by the relatively low market values of many companies with strong brands. For example, in 1986 the Hanson Trust had acquired Imperial Group for UK£2.3 billion. It then sold the group’s undervalued food portfolio for UK£2.1 billion and retained a highly cash generative tobacco business which net acquisition costs were just about UK£200 million for a business that generated an operating profit of UK£74 million.1