I was recently involved in an exercise to allocate the purchase price following an acquisition, and got involved in a debate with the client, as to how much could be realistically allocated to certain intangibles, and how much would end up in goodwill. One asset that seemed very judgmental was the value of an acquired email customer list: the number of names was very extensive, and the addresses were valid, but the response rates experienced in varioous prior mailing campagns had been very low. The question was, do non responsive "customer" email addresses have value if they havnt responded, and even worse, have not opened the emails they have received?
This valuation challenge was miles away from the usual
Allocation of purchase price
Answers
I would have gone with an expected value approach. For example: say there were 100 customers, each could be worth up to 5k with a full response, but your history suggests you will get a 20% response. The result would be value of $100,000 (100 x $5,000 x 20%) ignoring time value of money. You could of course make that a more granular analysis with different probabilities and values for different cohorts / types of customers.
There is perhaps a more fundamental issue with these customer lists if there value is being determined for their "emailability." There are now in place extensive restrictions on how mass mailings using email are permitted to happen including the requirement that the addressee be allowed to opt out of receiving the email (has to be allowed to unsubscribe). There are other restrictions on using email lists that could severely impact the claimed value of this list.
If the client is claiming a value due to these lists, I believe you'll need to consult with an expert on the legal use of such lists. The guidance provided by Constant Contact is a good place to start.
I think there have been some very good points made. Another issue is that the intangibles acquired should be amortizable for