Organization
Ocean Tomo

Ocean Tomo... intellectual capital has emerged as the leading asset class

Burgess COMMENTARY

Peter Burgess

SERVICES / CLIENTS / INDUSTRIES

Within the last quarter century, intellectual capital has emerged as the leading asset class. The term 'intellectual captial' refers generally to traditional Intellectual Property assets - patents, trademarks and copyrights. At Ocean Tomo, we uniquely include within the definition of 'intellectual capital' special client intangible assets, especially corporate and government preference rights.

Recent and anticipated changes in accounting rules and securities reporting will further the recognition of intangible assets. The growth in the value of Intellectual Capital Equity® can be seen when evaluating the market capitalization of the S&P 500 as shown in the chart below.

Components of S&P 500 Market Value

Intangible Value as Percent of Market Value for Non-US Markets

History of Merchant Banking

The term 'merchant bank' stems from leading merchants of the early 1800's, whether trading in grain, paper or steel, who transitioned from merchanting to banking when they had built up a sufficient reputation for soundness, reliability and wealth to warrant their colleagues' trust. The profits from banking the commodities of the day were greater and the risks were lower.* Early examples of merchant banking often involved international trade between the United States and Europe due to the sheer period of time required to contract, ship and receive goods. Financing trade gave merchant banks the opportunity to deal in commodities on their own account. Merchant banking and its dealing in commodities is distinct from investment banking dealing in securities. The merchant banker's role evolved in the 1920's when leading firms became heavily involved in advising, as well as financing, their clients.**

Although not defined in U.S. federal banking and securities laws, today the term 'merchant banking' is generally understood to mean 'negotiated private equity investment by financial institutions in the unregistered securities of either privately or publicly held companies.' Other investment banking services - raising capital from outside sources, advising on mergers and acquisitions, and providing bridge loans while bond financing is being raised in a leveraged buyout - are also typically offered by financial institutions engaged in merchant banking.***

Building on a legacy of innovation, Ocean Tomo is guided by the nation's leading intellectual capital managers and advisors - intellectual captial merchants. We represent an integrated offering of asset management and advisory services, many of which can be traced over one hundred years to comparable offerings of the most well-known of merchant banks.

*Burk, Kathleen, 'Morgan Grenfell 1838-1988: The Biography of a Merchant Bank', Oxford University Press, 1989, p. 5.

**Ibid., p. 98.

***Merchant Banking: Past and Present, by Valentine V. Craig. Valentine V. Craig is a Chartered Financial Analyst in the FDIC's Division of Research and Statistics.