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Terminal Value in SMEs: Testing the Multiple EV/EBITDA Approach

Author

Listed:
  • Vidal-Garcia Raül

    (Universitat Rovira i Virgili, Dep. Gestió d’Empreses, Av. de Remolins, 13Tortosa (Tarragona), Spain)

  • Ribal Javier

    (Universitat Politecnica de Valencia, Dep. of Economy and Social Sciences, Camino de Vera s/n 46022Valencia, Spain)

Abstract
This study focuses on answering whether EV/EBITDA multiple of public companies in the food industry can be useful to obtain the Terminal Value (TV) in the valuation of unlisted small and medium-sized food companies. A case study into Spanish unlisted agribusinesses is designed for several samples and accounting years from 2010 to 2013. By means of a discounted cash flow (DCF) model combined with bootstrap techniques, the TV/EBITDA empirical distribution of the unlisted multiples is obtained for two different scenarios of free cash flow (FCF) growth, and then compared with the EV/EBITDA of the listed companies in the same industry. The results show that the stock market EV/EBITDA multiple may be used to determine the TV in the valuation process of unlisted small and medium-sized food companies that consistently obtain positive cash flows.

Suggested Citation

  • Vidal-Garcia Raül & Ribal Javier, 2019. "Terminal Value in SMEs: Testing the Multiple EV/EBITDA Approach," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 14(1), pages 1-11, February.
    • Handle: RePEc:bpj:jbvela:v:14:y:2019:i:1:p:11:n:4
    DOI: 10.1515/jbvela-2018-0012
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    References listed on IDEAS

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    More about this item

    Keywords

    terminal value; valuation multiples; SMEs; food companies; EV/EBITDA; bootstrap;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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