L.E.PEREIROVALUATION IN LATIN AMERICAPAGE 1The valuation of closely-held companies in Latin AmericaLuis E.PereiroCenter for Entrepreneurship & Business VenturingUniversidad Torcuato Di TellaMiñones 2177, 1428 Buenos Aires, ArgentinaPhone.: (5411) 4783-3112 - Ext.191Fax: (5411) 4783-3220e-mail: [email protected]AbstractM&A activity has greatly increased in Latin America in the recent past. As a result, theimprovement of valuation techniques has gained a prominent place in the agenda of investorsand financial analysts dealing with the region. The task entails two substantial challenges,however. First, fundamental valuation requires the determination of an appropriate cost of capital,and the traditional CAPM-based models which are normally used to compute it are difficult toapply in such transitional, less efficient markets. Second, most companies and transactions inLatin America are closely-held operations, and hence bear components of unsystematic riskwhich classical appraisal techniques do not easily capture. In this paper, we develop acomprehensive fundamentals-based valuation model and provide supporting empirical data forvaluing privately-held companies in Latin American emerging markets.Keywords: Valuation, Latin America.
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