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IESE Research Papers,
IESE Business School
No Db/515: 75 common and uncommon errors in company valuation
Pablo Fernandez ()
Additional contact information
Pablo Fernandez: IESE Business School, Postal: Research Division, Av Pearson 21, 08034 Barcelona, SPAIN
Abstract: This paper contains a collection and a classification of 75 errors seen in company valuations performed by financial analysts, investment banks and financial consultants. The author had access to most of the valuations that are referred to in this paper when consulting in purchases, sales and mergers of companies, and in arbitrage processes. Some valuations are from public reports by financial analysts. The errors are classified in six main categories: 1) errors in the discount rate calculation and about the riskiness of the company; 2) errors when calculating or forecasting the expected cash flows; 3) errors in the calculation of the residual value; 4) inconsistencies and conceptual errors; 5) errors when interpreting the valuation, and 6) organizational errors.
Keywords: valuation; company valuation; valuation errors
52 pages, August 5, 2003
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DI-0515-E.pdf
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