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

Vidal-Garcia Raül () and Ribal Javier ()
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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

Journal of Business Valuation and Economic Loss Analysis, 2019, vol. 14, issue 1, 11

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.

Keywords: terminal value; valuation multiples; SMEs; food companies; EV/EBITDA; bootstrap (search for similar items in EconPapers)
JEL-codes: G12 G34 M41 Q14 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1515/jbvela-2018-0012

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