BENCHMARKING STUDY

What is the market service fee charge for providing administrative, technical, financial, representation or strategic management services? Is a 5% 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.

What is a RoyaltyRange benchmarking study?

Our benchmarking study is a detailed comparison of publicly available service agreements and service fee rates that helps with the determination of an arm’s length (market) service fee rate range for specific services. The main purpose of our benchmarking study service is to identify external transactions to assess the arm’s length range of service fee rates. The data provided is useful for setting reasonable service fee rates and preparing transfer pricing documentation, negotiating service agreements, consulting and more.

How does it work?

Once we have received your request for a RoyaltyRange benchmarking study, we will carry out the following steps within our database, in line with your chosen search strategy:

  1. Quantitative screening: We will perform an initial search to prepare a list of potentially comparable reports.
  2. Qualitative screening: We will manually review the sample and select a final set of reports.
  3. Financial analysis: We will calculate the range of service fees for third-party service agreements, including interquartile and median arm’s length service fee rate range, and a median are calculated.

All our agreements are manually analyzed, 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 to calculate a service fee rate range that complies with the arm’s length principle (any service fee rate within this range is deemed to be at the market rate).

 

What is included in a RoyaltyRange benchmarking study?

Your RoyaltyRange benchmarking study will contain:

  • 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 fee rate reports that were selected during the quantitative screening step, including elimination reasons for the rejected agreements.
  • An appendix with a list of service fee rate reports that were selected during the qualitative screening step, including elimination reasons for the rejected agreements.
  • Original sources (in PDF format) for the final set of comparable agreements.

Our benchmarking study report is prepared within 5 working days and provides a wealth of additional information on activities related to service industry provisions – such as the basis of service fee calculations; prepayment terms; terms of exclusivity; distribution of functions performed, risks assumed and assets used by the parties in the transaction.

Why RoyaltyRange?

There are many benefits to investing in RoyaltyRange’s benchmarking study service. These include:

  • Up-to-date data: Our proprietary RoyaltyRange database is constantly updated with new transactions and consists of agreements that are typically concluded between unrelated parties. This ensures that the data in our database reflects recent market practices.
  • Ease of use: All the work is done for you, with precision, by our professionals – meaning you will not have to go through hundreds of agreements in order to find what is relevant for you.
  • Speed of service:We finalize the whole process within several working days or before the deadline set by you.

Fees and how to pay

As we use our proprietary RoyaltyRange database to perform your searches, we can offer a very competitive price for our benchmarking study service. The standard fee is EUR €1,500 (plus VAT) per benchmarking study. This cost covers the preparation of the deliverables and post-search assistance.

 

 

How to request a RoyaltyRange benchmarking study?

To order a benchmarking study, simply send us a request. In the ‘Your request’ field, please provide us with a brief outline of your objective – e.g. “I need service fee rate range for advisory services.” You will also have an opportunity to highlight any criteria that relate to your search. There are no mandatory criteria, but the most common are:

  • Type of service (e.g. ‘management, administrative, financial’)
  • Keywords (e.g. ‘investment’)
  • NACE Rev. 2
  • Standard Industrial Classification (SIC) codes
  • Fee calculation base (e.g. ‘revenue’)

We can assist with creating an optimal search strategy. If you would like us to do this, or have any questions about our benchmarking study service, please contact us at RoyaltyRange today.