Evaluating the suitability of common
valuation models in determining the fair
value of unlisted equity
SM Zwane
22542280
Research proposal for the mini dissertation submitted in partial
fulfilment of the requirements for the degree Master of Commerce
in Management Accountancy at the North-West University
Supervisor:
Prof. Surika Van Rooyen
Co-supervisor:
N/A
Date of submission: 15 Feb 2023
Version: 5
Keywords: Fair value, valuation, equity, net assets, unlisted
equity, financial reporting (IFRS), corporate legislation
(Companies Act), acquisition and mergers, acquirer, target, fair
and reasonable, independent expert.
TABLE OF CONTENTS
1
INTRODUCTION ................................................................................................ 1
1.1
The fair value of equity ....................................................................................... 1
1.2
Equity valuation methods .................................................................................... 4
1.3
Problem statement ............................................................................................. 5
1.4
Research objectives ........................................................................................... 6
1.4.1
Primary objective ................................................................................................................ 6
1.4.2
Secondary objectives .......................................................................................................... 6
1.4.3
Theoretical objectives ......................................................................................................... 6
1.4.4
Empirical objective .............................................................................................................. 6
2
LITERATURE REVIEW ...................................................................................... 7
3
RESEARCH DESIGN AND METHODOLOGY ................................................... 9
3.1
Paradigmatic assumptions .................................................................................. 9
3.2
Literature study ................................................................................................... 9
3.3
Empirical study ................................................................................................. 10
3.3.1
Population and sampling .................................................................................................. 10
3.3.2
Data collection .................................................................................................................. 10
3.3.3
Data analysis .................................................................................................................... 11
4
ETHICAL CONSIDERATIONS ......................................................................... 11
4.1
Permission and informed consent ..................................................................... 11
4.2
Anonymity......................................................................................................... 11
4.3
Confidentiality ................................................................................................... 12
5
CHAPTER OVERVIEW .................................................................................... 12
REFERENCES………………………………………………………………...13
i
1
Introduction
Three main models are used when valuing a business or asset, namely the Cost model, Market
model, and Income model, also known as Discounted cash flow (DCF) model (Stowe et al.,
2007:17-22). These valuation models are commonly used to evaluate the fair value of publicly
listed equity. There is however a great need to use professional judgement in determining the
suitability of each of these models when estimating the fair value of unlisted equity. This study
seeks to determine the valuation models most suitable professionally when estimating the fair
value of unlisted equity.
1.1
The fair value of equity
The concept of fair value is prominent in financial reporting and corporate legislation pertaining
to corporate transactions (such as acquisitions and mergers). In both contexts, a fair value must
be assigned to a company’s equity to enable interested parties to make informed decisions. For
financial reporting purposes, the International Financial Reporting Standard 13: Fair Value
Measurement (hereafter referred to as IFRS 13) was released around May 2011 by the
International Accounting Standards Board (IASB) to define fair value and a framework for
measuring fair value. Koppeschaar et al. (2016:773) explain the concept ‘fair value’ contained in
IFRS 13 as “an amount that would be received for disposing an asset or amount paid for
transferring a liability, among market participants in an orderly transaction at the measurement
date”. Skae et al. (2014:410) define ‘fair value’ as “an amount that a willing seller is willing to sell
for and willing buyer is willing to purchase a company or equity in such a company, where both
the seller and buyer enter into the transaction based on reasonable knowledge with the terms of
the transaction being at arm’s length”. Chen (2022) on the other hand, argues that ‘fair value’ is
an amount that would be received to sell an asset in an open market, where the respective
buyer and seller both are free from undue pressure to enter the transaction, and both have
sufficient and reasonable knowledge regarding the asset in question. Fair value is like that
found in IFRS 13 because Skae et al. (2014:410) refer to the word ‘equity’, and IFRS 13
mention the words ‘asset’ and ‘liability’, where equity is the residual of an asset after reducing its
value by the value of a liability. Chen (2022) refers to the word ‘asset’, which is slightly biased
since it ignores that liabilities and/or equity can also be assigned a fair value.
The term ‘asset’ includes a cash-generating unit, being “an identifiable group of assets
(including goodwill) that generates cash inflows independently from other assets” (Service,
2012:504). Although this definition makes specific reference to an asset only and not a liability,
it is imperative to note that the liabilities associated with the group of assets are considered for
impairment-testing purposes, which means that a cash-generating unit is assessed for
1
impairment based on the carrying amount of its net assets (assets less liabilities). Furthermore,
assets also include financial assets, which includes (but is not limited to) an investment in
equity instruments of another company (IASB, 2011)
For accounting purposes, the term ‘equity’ is defined as “the residual value of assets after the
deduction of all liabilities” (Service, 2012:17). This implies that equity refers to a company's net
assets. Based on the stand-alone definition of equity and the definition of fair value refers to
both an asset and a liability, the interpretation of a fair value of equity would be the fair value of
a company’s net assets (the sum of assets at fair value less the sum of liabilities at fair value).
The framework provided in IFRS 13 prescribes three valuation models: income, cost, and
market (IASB, 2011). The income model is based on the present value of cash flows to be
received from an asset or paid to settle a liability. For this reason, the income model is often
called Discounted Cash Flow (DCF) analysis. The cost model is based on the replacement cost
of an asset. The market model is based on prices generated by transactions in an active market
(IASB, 2011).
If a company whose equity is being valued is listed on a stock exchange such as the JSE or
AltX, the market model would be applied to establish a fair value of a company’s equity since
this represents an un-adjusted quoted price, i.e., an observable input in an active market (a
Level 1 input) as per the IFRS 13 fair value hierarchy. This is the most preferred model by IFRS
13 since it considers it the most reliable measure of fair value (IASB, 2011). According to IFRS
13, level 2 inputs can also be considered when determining the fair value of listed equity.
Moreover, this is implemented by calculating valuation multiples such as EV/EBITDA using
comparable companies within the same market. Also, in this second-tier market model,
precedent buy/sell transactions of similar companies can be used in determining the fair value
of equity.
However, if a company whose equity is being valued is not listed on a stock exchange, this
would mean that there are no observable market inputs due to the lack of market activity for its
equity. The fair value of such equity may be determined in accordance with other equity
valuation methods, such as the cost model or income model.
The financial reporting standard IFRS 3: Business Combinations (hereafter referred to as IFRS
3) requires that goodwill recognised from a business combination transaction (acquisition) be
measured by an acquirer who gains control over an acquiree as the positive difference between
the sum of consideration paid and non-controlling interest share of net assets, less the fair value
of an acquiree’s identifiable net assets (IASB, 2020). Where the difference is negative, the
2
negative difference would instead be recognised as a gain on a bargain purchase. A fair value
of an acquiree’s net assets (equity) thus needs to be established to determine the goodwill or
gain on a bargain purchase that should be recognised from a business combination. The
financial reporting standard IAS 38: Intangible assets (hereafter referred to as IAS 38) in
conjunction with IAS 36: Impairments (hereafter referred to as IAS 36) requires that an
intangible asset with an indefinite useful life (such as goodwill) should be tested for impairment
annually, at each reporting date by comparing the carrying amount of a cash-generating unit’s
net assets (to which the goodwill is attributable to) to its recoverable amount being the higher of
the fair value less cost to sell or value in use (Service, 2012: 526).
The financial reporting standard IFRS 9: Financial Instruments (hereafter referred to as IFRS 9)
requires a financial asset to be measured in accordance with its business model (the intention
of holding the financial asset) as well as its cash flow characteristics as per the contractual
terms (IASB, 2019). A financial asset should be measured at amortised cost only if the financial
asset is held to receive contractual cash flows, and the contractual cash flows generated by the
financial asset comprise both a capital repayment and interest on the dates specified by the
contractual terms (IFRS 9). A financial asset should be measured at fair value through other
comprehensive income (OCI) only if the financial asset is held to receive contractual cash flows
and cash flows from its sale, where the contractual cash flows generated by the financial asset
comprise both capital repayment and interest as per the dates specified by the contractual
terms (IFRS 9). An investment in equity instruments of another company is a financial asset that
would yield cash flows in the form of dividends, which are cash flows that do not represent
capital repayments and/or interest. Therefore, since an investment in an equity instrument does
not qualify to be measured at amortised cost or fair value through OCI, it can only be measured
at fair value through profit and loss (IFRS 9). Therefore, a valuation of the equity in an investee
company is necessary to determine the investor company's fair value to measure the
investment in equity at fair value.
Preparers of annual financial statements place reliance on the fair value of equity to comply with
the measurement and disclosure requirements pertaining to financial reporting standards such
as IFRS 3, IAS 36, IAS 38 and IFRS 9. The Companies Regulations, 2011 (hereon referred to
as the Companies Regulations) was published by Rob Davies, The Minister of the Department
of Trade and Industry, in terms of s223 of the Companies Act 71 of 2008 (hereoafter referred to
as the Companies Act). Chapter 5 of the Company Regulations specifically regulates
transactions and takeovers (i.e., acquisitions and mergers). Regulations include ensuring that
the compensation for the equity subject to an offer during an acquisition or merger is fair and
reasonable. Regulation 81 of the Company Regulations, defines a ‘fair and reasonable opinion’
3
as “the opinion issued by an independent expert (usually a valuation expert from an investment
bank or advisory firm) to an independent board of the offeree company (hereon referred to as
the ‘target’) or offeror company (hereon referred to as the ‘acquirer’) regarding the fairness and
reasonableness of the consideration (offer) made in relation to a company’s equity that is
subject to an acquisition or merger”. To achieve this objective, the independent expert would
need to perform a valuation of the equity subject to a proposed acquisition or merger to
corroborate their opinion on whether the offer made by the acquirer is fair and reasonable.
Regulation 90 of the Company Regulations prescribes the income, market, or cost models as
valuation models available to the independent expert. The Companies Act also requires
establishing the fair value of an unlisted company’s equity to assess whether the compensation
offered to shareholders of a target whose shares are being acquired is fair and reasonable.
Based on the above recommendations, performing equity valuations play a prominent role in
compliance with IFRS measurement/disclosure requirements and legislation outlined by the
Companies Act pertaining to corporate transactions.
1.2
Equity valuation methods
According to Skae et al. (2022:499-500), approaches to determine the fair value of equity in a
company can be grouped into several categories with the main categories being the
replacement cost approach, the market comparable approach and the income approach. The
market approach uses inputs from the equity market for comparable entities to calculate
valuation multiples such as EV/EBITDA multiple, Price/Earnings (P/E) multiple, Price/Sales
(P/S) multiple, and Price/Book (P/B) multiple.These valuation multiples are then used to
estimate the fair value of the company being valued. Comparable multiples are used to derive
an equity value through comparable company multiples multiplied against either the company’s
maintainable earnings (EV/EBITDA model or P/E model), revenue (P/S model) or net asset
value (P/B), where the result of this multiplication is adjusted by the value of non-operating
assets and liabilities (Skae et al., 2014:444). Multiples analysis is a form of relative valuation.
According to Rodríguez-Valencia et al. (2023), “In relative valuation, the value of an asset is
derived from the pricing of comparable assets”.Correia et al. (2011:6-11) also prescribe the
same valuation models as those prescribed by Skae et al. (2014:425-446), except for the
EV/EBITDA multiple. With the replacement cost approach the replacement cost is determined
by using the value of a new asset and depreciating it to reflect its current state (Skae et al.
(2022:499-500. According to Farrugia et al. (2019:25-26), “the asset-based model is when the
company’s fair value is derived from its Net Assets Value”. Net Assets Value (NAV) is the sum
of fair values of the company’s assets less liabilities. Miciuła et al. (2020:7-22) also note that
mixed and unconventional models can be employed in determining the fair value of a
4
company’s equity. The cost-based model to valuation relies on the company's liquidation value
and replacement cost to estimate its equity's fair value (Farrugia et al., 2019:26).
The income approach is based on what a buyeer would be willing to pay for a future stream of
income or cash flows given the risks involved (Skae et al. (2022:500). One of the methods in the
income approach is discounted cash flow analysis (DCF). DCF analysis derives an equity value
by discounting the free cash flows of the firm using the weighted average cost of capital
(WACC) as a discounting factor to arrive at a Present Net Value (NPV) of the firm’s future cash
flows (Correia et al., 2011:6-11).
1.3
Problem statement
The valuation of private companies tends to pose a challenge as they are not listed on a stock
exchange (where a published share price would serve as a fair value of equity), and
professional judgement is required when deciding on the most appropriate valuation model to
apply.
IFRS and the Companies Act constantly refer to the need to establish a fair value of equity for
financial reporting (measurement/disclosure requirements) and ensure fair and reasonable
compensation on offers made to shareholders of a target. However, IFRS does not provide
sufficient guidance on which valuation model is more appropriate to apply to suit the
characteristics (business model, sustainability of its earnings, the stage of its life cycle, etc.) of
an unlisted company whose equity needs to be valued.
It is imperative to note that IFRS 13 only provides a framework for measuring fair value but does
not prescribe the most suitable methods for valuing private companies based on their
characteristics such as business sector, the stage of its life cycle, size, business model and
sustainability of earnings. Therefore, there is a great need to use professional judgement to
determine the most suitable methods of valuing private companies in chosen business sectors,
including Banking, Insurance, Mining, Oil & Gas, and Consumer goods.
Based on the above problem statement, the following research question arises: “Which equity
valuation model is most suitable in determining the fair value of equity in an unlisted company
for the various company categories such as Banking, Insurance, Mining, Oil & Gas, and
Consumer goods?”
5
1.4
Research objectives
1.4.1
Primary objective
The primary objective of this study is to investigate the suitability of each of the common equity
valuation models in determining the fair value of equity of an unlisted company for compliance
with IFRS requirements and the Companies Act rules surrounding the fairness and reasonability
of offers made for equity acquisitions based on the characteristics of each company category.
The primary objective will be achieved by critically examining the suitability of each common
equity valuation model in determining the fair value of private companies in each category.
1.4.2
Secondary objectives
The following theoretical and secondary empirical objectives have been formulated for the
study:
1.4.3

Theoretical objectives
To gain a deeper understanding of the valuation methods available for valuing the equity
of unlisted and listed companies.

To understand how equity’s fair value is used to meet the measurements and disclosure
objectives of IFRS 3, IAS 36, IAS 38 & IFRS 9.

To gain an understanding of how equity’s fair value would impact the decision-making of
users of the financial statements (including the impact of how an incorrectly determined
fair value of equity on the profitability and solvency of a company); and

To understand how equity’s fair value is used to meet the fair and reasonable objectives
of the Companies Act.
1.4.4
Empirical objective
As the research will follow a qualitative model, the following empirical objectives have been
formulated:

To determine what informs valuation professionals' decision when selecting the most
preferred valuation model for the unlisted equity in each company category.

To determine the most suitable valuation models for unlisted companies in each
business sector based on the opinions of valuation professionals on.

To determine which alternative (2nd best) valuation model can be applied for the unlisted
companies in each company category in question as a reasonability test based on the
opinions of valuation professionals
6
2
Literature review
According to Nel (2009a), Multiple Analysis valuation models are generally the least suitable
when compared to the DCF valuation model, but instead should be used as a reasonability test
to an equity valuation performed using the DCF valuation model. To test the accuracy of
Multiple Analysis valuation models, in his study, he performed an equity valuation of a JSElisted company using 5 different Multiple Analysis valuation models and compared each equity
value derived from each Multiple Analysis valuation against the JSE-determined equity fair
value to ascertain the extent to which the fair value of equity determined using Multiple Analysis
valuation models approximates the JSE-determined equity fair value. In his study, he further
stated that the most suitable Multiple Analysis valuation models for each company category
would be the one with the least dispersion (i.e., tighter distribution within the mean). He,
therefore, employed a statistical computation, the inter-percentile ranges (IPR) for each Multiple
Analysis valuation models on the 24 JSE industry sectors (these include Banking, Insurance,
Mining, and Consumer goods) to measure which Multiple Analysis valuation models have the
least dispersion for each of the 24 JSE industry sectors. In this study, he concluded that “the
P/E multiple does not perform the most accurate valuations across all sectors and that different
multiples should be used for different sectors” (Nel, 2009b:1). Therefore, Multiples valuation
models were least suitable since they did not produce accurate results across different sectors.
The study, however, omitted the DCF valuation model to substantiate Nel’s argument that the
DCF valuation is the most suitable equity valuation model compared to any of the Multiple
Analysis valuation models (where comparison is made among the various Multiple Analysis
valuation models). The writer also bases his conclusion on evidence only gathered through a
statistical computation, ignoring the company-specific factors (characteristics) such as its
business model, sustainability of its earnings, the stage of its life cycle as well as professional
judgements from other valuation experts with extensive knowledge and experience in equity
valuations. Furthermore, the writer’s study and the statistical sample are purely based on JSElisted companies and do not cater to unlisted companies' equity valuations.
On the other hand, Wist (2010:100) concluded that multiple valuation models seem to achieve
the highest accuracy in determining the fair value of equity. His argument is based on the view
that Multiple Analysis achieves an estimated deviation of 14% (with other models having an
estimated average deviation of 25%) compared to the transaction price of equity acquired/sold.
He performed his evaluation using regression analysis. The conclusion reached in his study
seems to be of a blanket model as it does not critically analyse the accuracy of each of the
various multiple analysis models (e.g., P/E or EV/EBITDA multiple) individually. Furthermore,
the analysis disregards company characteristics from which professional judgements of
valuation experts would have to be considered.
7
Kumah et al. (2009:3-12) evaluated the suitability of equity valuation models to address the
economic objectives as the fair value of unlisted equity of companies is said to have a
significant impact on a country’s Foreign Direct Investment (FDI). Kumah et al. (2009)
emphasises the importance of unlisted equity valuations, as the inaccuracy of these valuations
may fundamentally impact a country’s International Investment Position (IIP). This research
paper argues that statistical methods (used to assess the accuracy of equity valuations) can
often be misleading for international comparability as valuation practices in countries tend to
differ. The International Monetary Fund (IMF) shortlisted six equity valuation models to address
the inaccuracy phenomenon: Recent Transaction Price, Net Asset Value, DCF, Multiples
Analysis (P/E Multiple & P/B Multiple), Own Funds at Book Value and Apportioning Global
Value. The study compares these seven models based on their nature, benefits, and
shortcomings.
Furthermore, the study also suggests that the accuracy of Multiple Analysis models can be
measured by an ordinary least squares (OLS) model as a regression model. However, this
study excluded the evaluation of the EV/EBITDA multiple, a commonly used valuation model for
unlisted equity. In addition, the study does not rank/prescribe the suitability of equity valuation
models for the company categories.
Both Skae et al. (2014); Correia et al. (2011) prescribe the available valuation models to derive
a fair value of equity in their literature, but they do not mention what factors inform the decision
to use each valuation model or the suitability thereof based on the company type. Considering
this shortcoming, other authorities suggest solutions which are discussed below.
Ribal et al. (2010:547-548) argue that “if there are no available valuation multiples in a sector, a
discounted cash flow model can be used to estimate the fair value of each company”. Moreover,
once the fair value of each company is determined, common valuation multiples such as
EV/EBITDA can be calculated for that sector. Garcia and Pascual (2020:103-118) acknowledge
the complex nature of valuing unlisted equity in different business sectors and suggest that a
combination of methods should be used to get the most accurate valuation. These methods
include DCF analysis and Multiples analysis. Hassan and Ismail (2020:119-133) also
acknowledge that the valuation of unlisted equity is complex, especially when the firm has no
consistent cashflows. Furthermore, in cases where the firm has no significant and consistent
cashflows, they suggest that asset-based valuation methods will be the most suitable.
8
3
Research design and methodology
3.1
Paradigmatic assumptions
Ontology refers to what currently exists to humans from which they could gain more knowledge
(Moon & Blackman, 2017). In the context of this research topic, what exists would be the fact
that there are common types of valuation models which can be employed to derive a fair value
of unlisted equity to meet the measurement/disclosure objectives of IFRS 3, IAS 36, IAS 38 and
IFRS 9 as well as the fair and reasonable compensation objectives of the Companies Act,
where an acquisition or a merger occurs or is proposed. Ontological realism is the belief that
reality about something is based on a subjective experience (Levers, 2013). Ontological
relativism refers to the investigation of fundamental things that exist and are of reality, based on
objectivity and factuality (O’Grady, 2002:46). The stance for this research topic shall follow
ontological realism because no objective truth stands to be known as the selection of a
valuation model to be applied usually based on professional judgement and subjectivity.
Epistemology refers to what and/or how new knowledge can be derived from what currently
exists in humans (Blackman, 2017). The new knowledge derived in this study would be in terms
of which equity valuation model is more suitable based on the characteristics of a company
whose equity is valued. This new knowledge would be derived by critically analysing each
valuation model based on its principles and if/how these principles are aligned/applicable with
the characteristics of a company whose equity is valued (the ‘how’ element).
The terms positivism and interpretivism are considered to be branches of epistemology
(Raadschelders, 2011). Positivism relates to achievable knowledge and insights through
observing and measuring phenomena, where data collection is through statistics and numbers
and is measured objectively (Soleymani, 2017). Interpretivism is the opposite as it believes that
not everything is measurable but instead believes in achieving knowledge and insights from
beliefs and views from alternative individuals, where the interpretation of data can never be fully
objective (Soleymani, 2017). For this research, the stance to be taken shall be interpretivism, as
the research seeks to interpret and gain knowledge/insights from valuation experts.
3.2
Literature study
The purpose and objective of the literature review are to ascertain the extent to which the
proposed research topic has already been researched. This would help identify gaps in the preexisting research on which the proposed research would also focus. The sources to be
accessed during this course review include (but are not limited to) academic journals, textbooks,
and the internet.
9
3.3
Empirical study
Empirical research refers to research in which conclusions are reached based on empirical
(verifiable) evidence gathered through qualitative and/or quantitative data (Hedges, 2012).
Trafimow (2014) states that qualitative research analyses words and meanings, whereas
quantitative research analyses quantitative information such as numbers and/or statistics.
Qualitative research is used to provide insight into experiences and thoughts. Quantitative
research is used to validate assumptions and theories. This research shall follow a qualitative
model as the aim is to explore and formulate a theory on the suitability of valuation models to
each company category. The exploration and formulation shall be based on valuation experts'
professional judgement and experiences.
3.3.1
Population and sampling
The population would comprise valuation service providers, namely four of the largest
accounting firms in SA (also known as the Big 4); mid-tier accounting firms in SA; corporate
finance boutique firms; and Investment Banks. The sample would comprise five different
company categories. Furthermore, these are Banking, Insurance, Mining, Oil & Gas, and
Consumer goods. The justification for selecting the 5 is that there have been many
Merger/Acquisition transactions in these sectors, according to the researcher’s working
experience in valuations. The sub-population will consist of 3 teams of valuation experts with
experience in performing valuations across the 5 business sectors. Moreover, these teams of
valuation experts will be drawn from accounting firms, Corporate Finance Boutiques, and
Investment Banks. In doing so, the aim is to ensure an equal and unbiased distribution of
valuation experts for each company category.
The inclusion criteria would be based on the valuation expert having a minimum of 2 years of
working experience in equity valuations, where the expert has performed or reviewed an equity
valuation in that company category. The selected sampling model would be the non-probability
sampling technique (based on the experts available to participate) as the objective is to draw
conclusions representing the entire sub-group (Vehovar et al., 2016). In applying the nonprobability sampling technique, the elected method would be stratified random sampling as the
aim is to have an equal number of participants from each category mentioned above (Vehovar
et al., 2016).
3.3.2
Data collection
The data collection method is based on interviews. The interview participants shall comprise 15
participants, that is, 5 participants for each team. Furthermore, each of the 5 participants from
each team will be answering questions relating to a specific company category. The interview
questions will be semi-structured, that is, a combination of structured questions and open-ended
10
ones. Moreover, the structured questions on the questionnaire will seek to obtain answers to the
following questions:

Which valuation models are commonly used in a specific business sector, such as
Mining?

In the expert’s view, which valuation models produce the most accurate results?

Which is the most suitable valuation model for valuing unlisted companies?
This approach to data collection is suitable considering the exploratory nature of the research
question (Ruslin et al., 2022). The number of 15 participants seems reasonable as it does not
exceed the prescribed threshold of less than 20 interview participants to derive better-quality
data (Crouch & McKenzie, 2006). An initial interview will be held for each participant, and
subsequent/continuous interviews with each participant. If data saturation is not achieved, more
interviews with a different set of participants will be added. These interviews aim to gain insight
into what informs the decision on which valuation model to apply to derive a fair value of
unlisted equity.
3.3.3
Data analysis
Data from the interviews will be analysed to draw meaningful conclusions. First, the data will be
transcribed, and thematic analysis will be used to analyse the data. Thematic analysis analyses
qualitative data by identifying, coding, and categorising the data into themes. This method is
useful for identifying patterns and trends in the data and can be used to gain insights into a
particular phenomenon (Nowell et al., 2017:2). In this study, patterns and trends in the data will
be used to gain insights into the valuation models commonly used for private companies.
Conclusions on the suitability of each valuation model will be made according to insights gained
in the analysis.
4
Ethical considerations
4.1
Permission and informed consent
Permission and informed consent will be sought from the participants (valuation experts) before
the interview occurs. Participants will be informed that they can withdraw at any time. All
transcriptions of interviews will be dealt with anonymously, and respondents will not be identified
in any way.
Furthermore, the research paper will refer to other scholars’ work where applicable and willnot
present other scholars’ work as if it is the work of the preparer of this research paper.
4.2
Anonymity
The respondent's identity (valuation expert) to an interview/survey shall be kept anonymous.
11
4.3
Confidentiality
There would not be any breach of confidentiality since the research paper might make use of
any company information (in making references to practical examples of company events) that
is already made available to the public and/or company information that is not made available to
the public but with the necessary permission and consent to include in the research paper. The
research shall follow a pseudonyms model in reporting on the interviews to ensure that none of
the participants is identified.
5 Chapter Overview
The proposed chapter layout of this research paper is as follows:
i.
ii.
iii.
iv.
v.
Introduction
The section will introduce the topic and objectives of the study.
Literature review
This section will represent a review of what has been previously researched, which
will entail identifying gaps in previous research and how this research paper aims to
close those gaps.
Research Methodology
This section will outline the nature of data that would have been obtained from which
sources this data would have been collected, and how this data would have been
analysed.
Results
This section will outline the findings and analysis of the responses from the interview
participants.
Conclusion and recommendation
The section will represent conclusions reached on the most suitable valuation model
for each company category and recommend an alternative (2nd best) valuation model
which may be used as a reasonability test.
12
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