The Value of Corporate Control and the Comparable Company Method of Valuation

The Value of Corporate Control and the Comparable Company Method of Valuation

The comparable company method of valuation does not account for the value of corporate control. Therefore, the method must be adjusted if it is being used to value a company involved in a change-of-control transaction. We provide two alternative ways to adjust the comparable company method for the v...

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Veröffentlicht in:Financial management 2004-04, Vol.33 (1), p.91-99
Hauptverfasser: Finnerty, John D., Emery, Douglas R.
Format: Artikel
Sprache:eng
Schlagworte:
Accounting methods
Accuracy
Acquisitions & mergers
Business structures
Business valuation
Estimates
Estimation methods
Financial transactions
Market prices
Pharmacists
Price premiums
Stock prices
Target acquisitions
Target companies
Valuation
Valuation methods
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Zusammenfassung:The comparable company method of valuation does not account for the value of corporate control. Therefore, the method must be adjusted if it is being used to value a company involved in a change-of-control transaction. We provide two alternative ways to adjust the comparable company method for the value of corporate control. The efficacy of the adjusted comparable company method is confirmed on 51 highly leveraged transactions (HLTs) from Kaplan and Ruback (1995).
ISSN:0046-3892
1755-053X