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

摘要

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 Gala?i, 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.