Гиоев Георгий Владиславович
The Choice of Peers for Valuation of Public Companies (the Case of Food Retail Companies from BRICS and MINT Countries)
Стратегическое управление финансами фирмы
Valuation of companies with the use of multiples’ has some difficulties. The practical work and literature review demonstrate that the most serious problem lies in the area of selection of comparable companies in the case of absence of the peer companies in the same industry and the same country as the company to be valued. And this is a typical situation for virtually all Russian companies. The general recommendations given by the valuation specialists in case of valuation of Russian companies is to select comparable companies from BRICS countries (likewise a well-known valuation specialist Aswat Damodaran suggests to use Latin American countries for valuing a company from Chile) and make corrections accounting for the cross-country differences. However, such an approach has some limitations and can lead to high valuation errors. This research focuses on the development of the approach, which allows investors to select the companies from countries with the same economic environment and thus avoid the subjective choice while making corrections. The main foundation of our new approach is clusterization of countries based on the variables affecting valuation of companies. The selection of the comparable companies in countries that are chosen based on the clusterization method results in lower valuation errors in comparison with selection of the comparable companies from BRICS countries (or MINT countries in case of Turkey) and even from the local market.