Valuing IPO’s using EV/EBITDA multiple in the Brazilian market

Abstract

This paper verified whether the EV / EBITDA multiple of comparable firms (belonging to the same industry) are good parameters for pricing firms in their initial public offering (IPO’s). There were 116 IPO’s in the Brazilian market between 2004 and 2014. After the exclusions (financial firms, firms with lack of or negative information and outliers), 36 IPO’s were analyzed. In addition to the multiples of the comparable firms, it was used as explanatory variables: year dummy and variables related to value drivers (return, leverage and size). The results indicate that the multiple of comparable firms are relevant to price the firms 'going public', and the models with the mean and the median obtained better adjustment coefficient (R2). The analyzed value drivers were not significant. The year dummy was significant only for one model. The models with the NAICS' sector classification presented better adjustments than the models with the Economatica's® classification.

Keywords

• IPO
• EV/EBITDA
• Avaliação por múltiplos
• Avaliação de empresas