Theoretical and Applied Economics
No. 3 / 2019 (620), Autumn
Challenging the status quo: Steel producer case study on the enterprise value for M&A
The Bucharest University of Economic Studies, Romania
Ilie VASILE
The Bucharest University of Economic Studies, Romania
Abstract. The purpose of this paper is to analyze the enterprise value determinants, in order to help the interested parties make correct (investment) decisions by studying industry cases of mergers and acquisitions (M&A). In order to understand and identify value-adding opportunities for the companies, the paper investigates a divestiture within a major international steel group. The research questions refer to the understanding the relation between the enterprise value and market capitalization of the selected companies acting in the steelmaking field, including other factors such as the revenue, EBITDA, EPS or ownership structure. In order to understand how the enterprise value is determined, I have analyzed relevant theories, including Tobin’s Quotient (q) for a company/ aggregate corporations, for the study of the relation between the market value and its replacement value. If used empirically, Tobin’s q helps avoid issues of estimating shareholders’ risk-adjusted required return by the market prices. Besides using the graphical visualization of the share price, I have used the datasets available for several years on the value of several mature steel producing companies, market capitalization and other indicators. The methodology also includes Market Comparable method and own spreadsheet calculations. After analyzing the evolution of the share price for the global steelmaking leader (ArcelorMittal), between 2009 and 2018, I have not identified any growth potential; the market value of ArcelorMittal is a proxy for the market value of its assets.
Contents
The main factors of economic growth in the European Union
Currency risk management model
Assessing the performance of Pillar II in Romania – time weighted versus money weighted rate of return
Does democracy increase total tax revenues? The case of selected OECD countries
An evaluation of the turnover tax system in South Africa
Sensitivity of bankruptcy prediction models to the change in econometric methods
Risk management associated with the interbank relationships
Challenging the status quo: Steel producer case study on the enterprise value for M&A
Innovation as imperative for increasing productivity and economic growth: The case of the selected EU member countries and non-EU member countries
International Financial Markets face to face with Artificial Intelligence and Digital Era
Determinants of domestic saving rate in Turkey: A new generation econometric analysis
A behavioral model of failure in business
The effect of oil prices on foreign trade deficit in the economics of Bulgaria
Relationship between mortality and financial crisis. The case of Greece
Profit management in the case of financial distress and global volatile market behaviour: Evidence from Borsa Istanbul Stock Exchange
Insurance consumption in the Maghreb countries (Algeria, Morocco and Tunisia): Financial and institutional determinants
Non-linear finance-growth nexus for African countries: A panel smooth transition regression approach