Title: Truncated distributions of valuation multiples: an application to European food firms

Authors: Javier Ribal, Ana Blasco, Baldomero Segura

Addresses: Facultad de Administracion de Empresas, Departamento de Economia y Ciencias Sociales, Universidad Politecnica de Valencia, Camino de Vera, s/n, 46022 Valencia, Spain. ' Facultad de Administracion de Empresas, Departamento de Economia y Ciencias Sociales, Universidad Politecnica de Valencia, Camino de Vera, s/n, 46022 Valencia, Spain. ' Facultad de Administracion de Empresas, Departamento de Economia y Ciencias Sociales, Universidad Politecnica de Valencia, Camino de Vera, s/n, 46022 Valencia, Spain

Abstract: Company valuation is increasingly used in company management for various purposes. However, in Spain, information that is useful for small and medium-sized enterprises (SMEs) is non-existent. In order to broaden this information, a mass model for valuation of companies is proposed to enable valuation multiples to be obtained. This model has been applied to SMEs in the food sector in Spain. However, the asymmetry of the distributions obtained causes an upwards bias of the mean multiples and makes it difficult to establish statistically significant differences between the distributions. To solve this problem, an algorithm to eliminate outliers has been designed which enables the most probable range of values to be obtained for each multiple. The multiples obtained are compared with the multiples for European food companies listed on the stock market, revealing statistically significant differences.

Keywords: asymmetric distributions; DCF; discounted cash flow; firms valuation; food industry; truncated distributions; valuation multiples; company valuation; Spain; small and medium-sized enterprises; SMEs; Europe.

DOI: 10.1504/IJMOR.2009.026275

International Journal of Mathematics in Operational Research, 2009 Vol.1 No.4, pp.419 - 432

Published online: 05 Jun 2009 *

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