BENCHMARKING STUDY (service agreements)
What is the market service charge for providing administrative, technical, financial, representation or strategic management services? Is a 10% revenue-based management fee for providing management services to associated enterprise too low in comparison with the rates applied by third parties? Did your client set a market rate when concluding a service agreement with its subsidiary? If you encounter these kinds of questions in your day-to-day professional life, a RoyaltyRange benchmarking study could be the right service for you.
Our benchmarking study is a detailed comparison of publicly available service agreements and fees for services in order to determine an arm’s length (market) service fee range for the provision of specific services. Although the main purpose of the benchmarking study is to identify external transactions to assess whether intercompany transactions comply with the arm’s length principle, the data provided in our benchmarking study reports may be useful for purposes other than transfer pricing compliance, such as setting reasonable service fee rates, negotiation of service agreements, and consulting.
All agreements are manually analysed, rejected or selected, so that the final set consists only of agreements with the most comparable terms. We use these agreements to conduct a Comparable Uncontrolled Price (CUP) analysis in order to calculate a service fee range that complies with the arm’s length principle, i.e. any service fee within this range is deemed to be at market rate.
Our benchmarking study report is prepared in a relatively short period of time and provides a wealth of additional information on the practices in your industry, e.g. basis of fee calculation, prepayment terms.
What are the steps of the search process?
- Quantitative screening. The search in the RoyaltyRange database yields a list of potentially comparable reports.
- Qualitative screening. The sample is manually reviewed and the final set of reports is selected.
- Financial analysis. The range of service fees for third-party service agreements, an interquartile arm’s length service fee rate range, and a median are calculated.
What will you get as a result?
By ordering a RoyaltyRange benchmarking study service, you will receive:
- A detailed report with a write-up of the entire search process, including the search strategy applied, a description of the quantitative and qualitative screening steps taken, the final list of comparable agreements, and a calculation of a market service fee rate range based on the comparable agreements.
- An appendix with a list of primary service agreement reports that are selected during the quantitative screening step, including elimination reasons for the rejected agreements.
- An appendix with a list of full service agreement reports that are selected during the qualitative screening step, including elimination reasons for the rejected agreements.
- Original sources of the final set of comparable agreements in PDF format.
Why is our benchmarking study advantageous?
- We use our proprietary RoyaltyRange database. The database is constantly updated with the newest transactions and consists of agreements which were typically concluded between unrelated parties. This ensures that the data in our database reflects recent market practices.
- All the work is done for you with precision by our professionals – you will not have to go through hundreds of agreements in order to find what is relevant for you.
- We finalise the whole process within several working days or before the deadline set by you.
How much does it cost and how do I pay?
Due to the fact that we use our proprietary RoyaltyRange database to perform the search, we can offer a very competitive price for this service. The standard price for one benchmarking study is EUR 1,500 plus VAT.
This price covers the preparation of the deliverables and any further assistance you may require when reviewing the results.
How do I order the RoyaltyRange benchmarking study service?
To order a benchmarking study, please provide us with a search strategy. There are no mandatory criteria, but the most common are:
- Type of service (e.g. management, administrative, financial).
- Industry or keywords (e.g. investment).
- NACE rev. 2 or SIC codes.
- Fee calculation base (e.g. revenue)
If required, we can assist with creating an optimal search strategy. Please feel free to contact us to discuss your requirements and search strategy.