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Benchmarking study

BENCHMARKING STUDY

What is the market royalty rate for licensing a clothing brand? Is a 5% royalty rate for licensing your technology too low in comparison with the rates applied by third parties? Did your client set a market royalty rate when granting a licence to 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 licence agreements and royalty rates in order to determine an arm’s length (market) royalty rate range for the specific products or 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 royalty rates, negotiation of licence agreements, intellectual property valuation, and consulting.

All agreements are manually analysed, rejected or selected, so that the final set consists only of agreements with the most comparable licensing terms. We use these agreements to conduct a Comparable Uncontrolled Price (CUP) analysis in order to calculate a royalty rate range that complies with the arm’s length principle, i.e. any royalty rate 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 licensing practices in your industry, e.g. basis of royalty calculation, prepayment terms, terms of exclusivity, distribution of functions performed, risks assumed and assets used by the parties in the transaction, rights to enhancements, revisions and updates, and extent and duration of legal protection.

What are the steps of the search process?

  1. Quantitative screening. The search in the RoyaltyRange database yields a list of potentially comparable reports.
  2. Qualitative screening. The sample is manually reviewed and the final set of reports is selected.
  3. Financial analysis. The range of royalty rates for third-party licence agreements, an interquartile arm’s length royalty 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 royalty rate range based on the comparable agreements.
         
  • An appendix with a list of primary royalty rate reports that are selected during the quantitative screening step, including elimination reasons for the rejected agreements.
  • An appendix with a list of full royalty rate 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 1,200 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 intangible (e.g. trademark, patent).
  • Industry or keywords (e.g. mining machinery).
  • NACE rev. 2 or SIC codes.
  • Transaction type (e.g. licence, franchise, sale).

If required, we can assist with creating an optimal search strategy. Please feel free to contact us to discuss your requirements and search strategy.  

Best solution for patent box, transfer pricing and valuation

Our benchmarking studies are very popular and useful for the patent box, transfer pricing documentation and valuation purposes.