Factors of enterprise value - the privatization of ‘Sidex Galati’ Romania (case study)

Open access

Abstract

The enterprise value is central in business transactions (i.e. mergers and acquisitions, entrance of new shareholders or exit, bank loans), privatization of state-owned companies, etc., when the seller and the buyer confront each other’s business valuations trying to identify as many weaknesses as possible on the other side. Such important value as the enterprise’ is not an exact figure that can be calculated with precision at a certain date for a certain company, but an approximation that both buyer and seller may consider in each other’s attempt to close a good deal for himself/ herself. The valuation approach in this paper is a market method for business investments and comparable sales. This retrospective analysis of a major privatization in the Romanian steel industry - when the industry’s 'giant' was sold by the Romanian State - aims to identify key factors of the enterprise value in the context of international transactions. This was a high-profile privatization of great significance for the European steel industry and this analysis aims to understand enterprise value in order to model it. For this purpose, the article takes into consideration the information available regarding the privatization of Sidex Galați, the relevant literature and the author’s experience, supplemented by the information from the post-privatization evolution of the Romanian steel enterprise. As a result, the article draws lessons and concludes on determining factors of enterprise value, such as assets, solvency, company's history, cash flow, taxation etc., while the price transaction in the case of the privatization of Romanian steel enterprises was also influenced by exogenous factors, such as the steel market, the State's need for revenues, the controlling package of the company sold, etc.

If the inline PDF is not rendering correctly, you can download the PDF file here.

  • Adevărul Moldova. (2011 11 28). Galați. Retrieved 11 2017 from http://adevarul.ro/locale/galati/cresterea-descresterea-combinatului-siderurgicgalati-s-au-implinit-45-ani-ceausescu-taiat-panglica-foto-1_50ad7af17c42d5a66395f38c/index.html

  • ArcelorMittal Galati. (n.d.). About us. Retrieved 2017 from http://galati.arcelormittal.com/about-us.aspx?sc_lang=en

  • ArcelorMittal galati. (n.d.). Company History. Retrieved 11 2017 from http://galati.arcelormittal.com/about-us/company-history.aspx?sc_lang=en

  • ArcelorMittal Hunedoara. (n.d.). Information for shareholders. Retrieved 12 2017 from http://www.arcelormittalhunedoara.ro/ro-RO/S_A_en.html

  • ArcelorMittal. (2006 06). Arcelor recommends improved Mittal Steel offer. Retrieved 12 2017 from http://corporate.arcelormittal.com/news-and-media/pressreleases/archive/2006/jun/25-06-2006?lang=english

  • Arcelormittal. (2009 02 11). Previous results. Retrieved 12 201 from http://corporate.arcelormittal.com/~/media/Files/A/ArcelorMittal/news-andmedia/press-releases/2009/February/128-27-2-ENArcelormittalReportsFullYearAndFourthQuarter2008Results.pdf

  • ArcelorMittal. (2012 09 30). Shareholding structure. Retrieved 12 2017 from https://web.archive.org/web/20121005074851/http://www.arcelormittal.com/corp/investors/corporate-governance/shareholding-

  • ArcelorMittal. (2017 12 22). Share monitor. Retrieved 12 22 2017 from http://corporate.arcelormittal.com/investors/investor-toolkit/share-monitor

  • ArcelorMittal. (n.d.). Arcelor recommends improved Mittal Steel offer. Retrieved 12 2017 from http://corporate.arcelormittal.com/news-and-media/pressreleases/archive/2006/jun/25-06-2006?lang=english

  • ArcelorMittal. (n.d.). Fact book. Retrieved 12 2017 from http://corporate.arcelormittal.com/~/media/Files/A/ArcelorMittal/investors/factbook/2016/factbook-2016.pdf

  • ArcelorMittal. (n.d.). Glossary of analyst model terms. Retrieved 12 2017 from http://corporate.arcelormittal.com/investors/investor-toolkit/glossary-of-analystmodel-terms

  • ArcelorMittal. (n.d.). Our history. Retrieved 12 2017 from Who we are: http://corporate.arcelormittal.com/who-we-are/our-history

  • Beisheim M. E. U. (2012). Limits to Privatization: How to Avoid Too Much of a Good Thing : a Report to the Club of Rome. London: Earthscan.

  • Brooks C. (2014). Introductory Econometrics for Finance. Cambridge: Cambridge University Press.

  • Daianu D. (2004). Romania Since 1989: Politics Economics and Society. In H. F.Carey (Ed.) Romania Since 1989: Politics Economics and Society (p. 402). Oxford: Lexington Books.

  • EBRD. (2001). Annual report 2001. Retrieved 12 2017 from https://bg.uek.krakow.pl/ezasoby/ebor/ar/ar01.pdf

  • EBRD. (2001). Annual report 2001. Retrieved from https://bg.uek.krakow.pl/ezasoby/ebor/ar/ar01.pdf

  • Fernandez P. (2006 05). IESE Business School University of Navarra. Retrieved 12 2017 from http://www.iese.edu/research/pdfs/DI-0629-E.pdf

  • Fernandez P. (2017 10 11). Cash flow is a Fact. Net income is just an opinion. Madrid Spain.

  • Green P. S. (2002 07 07). Betting Big On Reviving 'Black Holes'. Retrieved 12 2017 from THE BUSINESS WORLD: http://www.nytimes.com/2002/07/07/business/thebusiness-world-betting-big-on-reviving-black-holes.html.

  • International Directory of Company Histories. (2000). Ispat International N.V. History. Retrieved 2018 from http://www.fundinguniverse.com/company-histories/ispatinternational-n-v-history/.

  • Ispat International N.V. (1997). Annual Report 1997. Retrieved 2018 from https://ddd.uab.cat/pub/infanu/118750/iaMITTALSTEELa1997ieng.pdf.

  • John Bennett S. E. (2006 06). Working Paper: Methods of Privatization and Economic Growth in Transition Economies. Retrieved 11 2017 from http://hdl.handle.net/10419/140745 In M. Kantor Valuation for Arbitration: Compensation Standards Valuation Methods and Expert Evidence. Kluwer Law International.

  • Marinov S. M. (2011). The Changing Nature of Doing Business in Transition Economies. Palgrave Macmillan.

  • Moody's. (2014 11 20). Moody's Investor Service. Retrieved 12 2017 from https://www.moodys.com/research/Moodys-Used-and-Abused-EBITDA-remains-akey-measure-of--PR_313393.

  • Novus Via SRL Oradea. (n.d.). Xtreme Freelance. Retrieved 11 2017 from https://www.youtube.com/user/Customblogs/.

  • OECD. (2003). Privatising State-Owned Enterprises: An Overview of Policies and Practices in OECD Countries. ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT.

  • Policy Warning Report Romania. (2003 05). Retrieved 12 2017 from http://sar.org.ro/files/May2003-Economy1.pdf.

  • SAP. (n.d.). What is ERP? (SAP) Retrieved 11 2017 from https://www.sap.com/products/what-is-erp.html.

  • TopFirme. (2017). TopFirme. (TopFirme) Retrieved 11 2017 from https://www.topfirme.com/afacere/arcelormittal-gala%C5%A3i-sa/6jjdf38dp/

  • Whited H.-h. I. (n.d.). Normalization of balance sheets and income statements. Retrieved 11 2017 from Journal of Case Research in Business and Economics: http://www.aabri.com/manuscripts/10476.pdf.

Search
Journal information
Metrics
All Time Past Year Past 30 Days
Abstract Views 0 0 0
Full Text Views 265 187 12
PDF Downloads 214 168 20