Fall 2006 issue of Horizons

TOP SECRET

organization. Such upgrades can add significant value, but the value might not be immediately recognized. However, the benefits of improved intangible assets will be felt over time, and the increased value of a firm's intangible assets certainly will be realized at the time the firm is sold. Additionally, many times a company will find that an increased focus on enhancing the value of its intangible assets will provide operational benefits as well. For instance, customer lists are intangible assets that can be great sources of value both to the firm and to a potential acquirer of the firm. The information normally retained in customer lists can provide essential and unique insight into those customers. Enhancing and expanding that insight can provide value to the firm from an operational standpoint and in the event of a sale. Assembled workforce: If relevant, consider extensive training to enable employees to reach a higher level of expertise. In the short run, enhanced employee expertise will improve the operational capabilities of the firm. Over the long term, a well-trained workforce could attract a potential acquirer seeking to expand into your industry but hesitant to spend the time and money to hire and train employees to reach the same level of expertise as your workforce. Extensive training also can help a company develop management depth and avoid key staffing issues. Having a strong top executive is great, but making sure that the business could survive without the top executive is essential. Customer Lists: When considering strategic options for the management of customer lists, it is important to remember that value is created in part through increased depth and breadth of a company's customer lists. That is, the amount of customer information a company retains is essential, but the Here are a few ideas on specific strategies to enhance intan- gible asset value:

size and diversity of a company's customer base is equally important. It's great to have a strong customer relationship that has enabled your company to grow rapidly, but too much customer concentration increases risk. Diversity is good, across industries if possible. Setting a diversified customer base as a strategic goal is a management decision that will reduce business risk for a company and make the company a more attractive acquisition target. Trade name: Think about potential acquisitions that would provide complementary products or capabilities that could be leveraged under your brand. For many companies, the culti- vation and maintenance of a strong brand can do more to create value than any physical asset. Because they are an important component of total firm value and because they will become even more important in the future, intangible assets should be considered as part of the total asset base. As such, they deserve as much of a compa- ny's attention as physical assets. In the years to come, compa- nies that focus on the management and enhancement of intangible assets will be rewarded with improved operational performance and increased shareholder value. Questions? Contact Dale Lash, CFA Partner, Corporate Finance & Forensic Services Group 314-290-3261 dale.lash@rubinbrown.com

12 • summer 2006 issue

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