Rating and ranking firms with fuzzy expert systems: the case of Camuzzi

Magni, Carlo Alberto (2004): Rating and ranking firms with fuzzy expert systems: the case of Camuzzi.

Abstract

In this paper we present a real-life application of a fuzzy expert system aimed at rating and ranking firms. Unlike standard DCF models, it integrates financial, strategic and business determinants and processes both quantitative and qualitative variables. Twenty-one value drivers are defined, concerning the target firm (strategic assets in place and expected financial performance), the acquisition (synergies, quality of management) and the sector (intensity of competition, entry barriers). Their combination via “if-then” rules leads to the definition of an output represented by a real number in the interval [0,1]. Such a number expresses the valuegenerating power of the target firm inclusive of synergies with the bidder (Strategic Enterprise Value). The system may be used for rating and ranking firms operating in the same sector. A regression analysis using hostile takeovers multiples may be employed to translate the score into price. The real-life case refers to Camuzzi (a natural gas distributor), acquired by Enel, the Italian ex monopolist of electric energy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate finance, firm, rating, ranking, expert system, fuzzy logic, evaluation
• Subjects: M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M0 - General; G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting ; Fixed Investment and Inventory Studies ; Capacity; C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs > C88 - Other Computer Software; G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General; C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs > C80 - General

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