In an earlier posting, I talked about how intangible assets are being used more and more as collateral for loans, including in one case to finance a leverage buy-out. So this item in today’s Washington Post about possible takeovers in the hotel industry (Stock Rush Belies Marriott Sale Odds) caught my eye.
Another reason Marriott is a less likely target, [Robert] LaFleur [an analyst with Susquehanna Financial Group] said, is because unlike Hilton, Marriott owns little real estate. The firm prefers to manage and franchise the hotels in its chain. At the end of last year, it owned only 13 of more than 2,800 hotels across its brands. That's important because private-equity groups like Blackstone can get more attractive financing rates when they can borrow against actual assets, letting them swallow companies cheaper and make more money quicker.
"The Marriott brand has a lot of value, but it is intangible value," LaFleur said.
It seems that tangible assets rich companies are more of a target than those with high intangible value. For now. My betting is that this will change as the financial community learns to monetize intangibles.
But as I said earlier, using intangibles as a form of financing is a difficult transaction - with a lot of back-up mechanisms needed. Lots of issues here - which will be explored in our forthcoming working paper on monetization of intangible assets.
Leave a comment