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The Journal of Private Equity

The Journal of Private Equity

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Article

The Private Company Discount from a European Perspective: An Analysis Based on the Acquisition Approach for Comparable Transactions of European Target Companies

Christian Klein and Marcus Scheibel
The Journal of Private Equity Winter 2012, 16 (1) 74-82; DOI: https://doi.org/10.3905/jpe.2012.16.1.074
Christian Klein
is an assistant professor of finance at the University of Hohenheim in Stuttgart, Germany.
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  • For correspondence: christian.klein@uni-hohenheim.de
Marcus Scheibel
is a PhD student at the Department of Accounting & Finance at the University of Hohenheim in Stuttgart, Germany.
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  • For correspondence: marcus.scheibel@uni-hohenheim.de
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Abstract

There is strong evidence from previous research that a discount for U.S. private companies exists relative to their publicly traded peers. Because such a discount has substantial influence on the valuation of private companies, which are the main legal corporate form in Europe, in this study the authors analyze how European private companies are valued in comparison to their European publicly traded peers and find that a discount of around 5% exists for eurozone private companies. This is lower than the potential costs for an IPO, and supports our theory that a listing gives the owner a valuable option of selling minority stakes into the stock market. We also find that, when using the acquisition approach, size and profitability have no significant influence on the private company discount.

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The Journal of Private Equity: 16 (1)
The Journal of Private Equity
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The Private Company Discount from a European Perspective: An Analysis Based on the Acquisition Approach for Comparable Transactions of European Target Companies
Christian Klein, Marcus Scheibel
The Journal of Private Equity Nov 2012, 16 (1) 74-82; DOI: 10.3905/jpe.2012.16.1.074

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The Private Company Discount from a European Perspective: An Analysis Based on the Acquisition Approach for Comparable Transactions of European Target Companies
Christian Klein, Marcus Scheibel
The Journal of Private Equity Nov 2012, 16 (1) 74-82; DOI: 10.3905/jpe.2012.16.1.074
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