Company valuation practices in the mergers and acquisitions market in Brazil
DOI:
https://doi.org/10.1590/1808-057x20252257.enKeywords:
mergers and acquisitions, market practices, valuationAbstract
This article aims to highlight valuation practices in the mergers and acquisitions market of an emerging market country such as Brazil. There is a lack of analysis on the specifics of valuation practices in an emerging market that is not restricted to a specific niche or professional association. Additionally, the scope of the questionnaire was expanded. The results provide important insights into valuation practices in Brazil’s mergers and acquisitions market. This study is relevant for appraisers, shareholders, and company directors who adopt inorganic growth strategies, as well as tax authorities because goodwill is tax-deductible in the event of a merger by the acquirer. A structured questionnaire with predefined answers was administered to professionals involved in valuations, and distribution and correspondence analyses were performed. The results indicate that there is no common practice among appraisers, though there is greater similarity among professionals from financial advisory and consulting firms. The results suggest that transactions may occur at prices higher than the fair value of the acquired company, particularly among strategic investors. Approximately 15% of the appraisers report being influenced by the herd effect. Most consider additional premiums beyond the conceptual basis of the Capital Asset Pricing Model, which are mainly supported by the appraiser’s private knowledge. However, strategic investors do not appear to consider these premiums, as they are more concerned with the representativeness of the perpetual period. Further discussion is needed on cognitive biases and other factors that may influence pricing in mergers and acquisitions, as well as conceptual and methodological errors that may occur in the valuation process.
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