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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Beam: Consumed

C. HUYGENS - Thursday, January 16, 2014
It seems like only yesterday that Huygens read about Beam, Inc., the global alcoholic beverages company, and how its annual regulatory disclosure on reputation risk (10K item 1A) wasn't helpful to investors. According to the study reviewed in Agenda, the Financial Times service, Beam didn't seem to understand that its reputation emerged from its operations. Rather, the firm seemed to confuse reputation with brand. The study suggested that better risk disclosure, evidencing better operational controls, could boost value.

For a company that understood how operations underpinned reputation, this seemed like an opportunity to discover hidden value. Take a company like Beam with a well known brand and significant reputational value, and improve it even further by reducing operational risks.

And so it came to pass Monday that Japan's Suntory purchased $10B Beam. From Reuters:

Suntory Holdings Ltd SUNTH.UL on Monday said it would buy U.S. spirits company Beam Inc (BEAM.N) for $13.6 billion cash in a deal that would make the Japanese company the world's third-largest spirits maker.

Including the assumption of Beam's net debt, the deal is valued at $16 billion. It brings together Beam's Jim Beam and Maker's Mark bourbons, Courvoisier cognac and Sauza tequila with Suntory's Yamazaki, Hakushu, Hibiki and Kakubin Japanese whiskies, Bowmore Scotch whisky and Midori liqueur.

Full story here.

The reputational value profile of Beam, according to Consensiv and based on Steel City Re's reputational value metrics, is shown below. It is worth noting that while the Reputation Premium is near the top of the heap, the Consensus Trend, CT, has been hovering often above the median of 55 companies in the peer group.

For more background on the Consensiv reputation controls, click here. To view the December 2013 reputational value league table, based on Consensiv's metrics, and available exclusively at CFO.com, click here. Last, to read more about how reputational value is linked to stakeholder expectations and enterprise value, read, Reputation Stock Price and You: Why the market rewards some companies and punishes others (Apress, 2012) (click here).

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