Jonathan Knowles has a background in Finance, Business Strategy, Brand Strategy and Brand Valuation. His articles have appeared in Harvard Business Review, MIT Sloan Management Review, The Wall Street Journal, Marketing Management, Professional Investor and Intellectual Asset Management.

Intangible Value – By Region

by Jonathan Knowles on September 9, 2009

As readers of this blog will know, I have recently pulled the data on the value of publicly-traded companies with a market cap of over $1bn. 

Today I thought I would share some headline data on the ten year (1999 to 2008) average of tangible book value as a proportion of market value by geographical region:

  • US and Canada  16%
  • Europe  23%
  • Middle East and Africa  32%
  • Latin America  43%
  • Asia  45%

In aggregate over the 10 year period, tangible assets accounted for only 24% of market value across all regions. 

As might be expected, data for June 2009 shows that all regions have seen a decline in the multiples at which their companies trade over tangible book value.  Across the board, the proportion of market value represented by tangible book value has risen significantly:

  • US and Canada  21%
  • Europe  30%
  • Middle East and Africa  44%
  • Latin America  44%
  • Asia  51%

In aggregate, tangible book value now represents 33% of the $26 trillion in market value covered by my analysis.

Tagged as: Intangible Value, Marketing Finance, Measure Value

{ 2 comments… read them below or add one }

1 Chris Kenton September 10, 2009 at 3:23 pm

Jonathan–

Fascinating data. Forgive the novice questions: It seems like having a strong tangible foundation is a hedge against an economic decline. But I’m curious what the decline in multiples indicates for companies optimized for leveraging intangible assets. I met with a publicly traded software company last week that claimed, very off-the-record, that they’ve reached 30% office vacancy in their massive headquarters by promoting workforce mobility policies. I suppose if they downsize their real estate, they could bank the savings or invest in other tangible assets. But is there some point where there’s an optimal ratio for tangible and intangible assets in different business sectors?

2 Jonathan Knowles September 11, 2009 at 5:26 pm

Hi Chris
Thank you for a very perceptive question. It is certainly true that different industries have very different tangible asset intensities (manufacturing companies have factories but software companies have few tangible assets other than their computers). But whether there is an optimal ratio for tangible to intangible assets in any given industry is not something that I have specifically considered. Let me think about this and get back to you.

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