The growing dominance of intangible assets in company balance sheets raises questions about their resilience in the face of rising inflation. While historically, tangible assets like land and buildings have been seen as inflation hedges, the increasing value of brands, patents, and software creates uncertainty about how these assets will perform in a high-inflation environment. This article explores the potential risks and challenges posed by high inflation to intangible asset valuations and corporate deal-making.
If you’re a rich Latin American you’re probably just back from Punta del Este. Qué bueno! The Uruguayan beach town is a fabulous mix of Miami and the French Riviera. And almost as expensive due to years of cash flowing in to escape the inflation in neighbouring countries such as Argentina. What’s nicer than an ocean-view apartment to preserve your wealth in real terms? Physical assets have always had this appeal.
Add high and volatile inflation and imagine how accurate such estimates become. With global mergers and acquisition volumes approaching $4tn last year, this is cause for concern. Even with low inflation, the prevalence of intangibles raises the likelihood that companies overpay for each other. This normally happens in two ways. Either future profits or historical asset values are overstated. Most likely both.
INFLATION INTANGIBLE ASSETS COMPANY VALUATION MERGERS AND ACQUISITIONS BRAND VALUE
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