One of the most problematic valuations of an intangible involves the workforce. How can a financial metric capture the skills and knowledge, especially of a highly technical workforce. Partly for that reason, accounting rules explicitly forbid placing a value on an acquired workforce as part of a merger or acquisition — while explicitly requiring the valuation of other acquired intangible assets.
Valuation experts say they can come up with a number for the workforce – based either on the replacement costs (what it would cost to hire the same set of skills). That, of course, does not take into account the organizational and interpersonal aspects of a team of workers.
Another way is to look at the market valuation. How much is the equities market willing to pay. That approach has its own difficulties — as the DealBook blog of the New York Times points out (Blackstones Million Workers)
Are Blackstone Group’s employees really worth an average of $50 million apiece? That value, based on reports that the private equity firm could be worth $40 billion in an initial public offering, “could well be the highest bounty ever placed on the heads of office workers,” Breakingviews writes.
The Breakingviews article compares that level to the $10 million or so value placed on AOL and Google at the height of the dot.com bubble and the current $5 million per worker valuation of Moody’s, which has a more sustainable business.
As is the case with other equities-based measures of intangibles, it is hard to separate the value from the froth.