A nonlinear state marginal price vector model for the task of business valuation. A case study: The dimensioning of IT-service companies under nonlinear synergy effects

Abstract

In the present contribution we present a nonlinear extension of the innovative linear investment-oriented company valuation method and so-called state marginal price vector model of Toll which represents a two-step procedure separated into a base and a valuation approach. As novel aspect we address nonlinear synergy effects in M&A’s. For this purpose we introduce a nonlinear framework within a semi-discrete convex optimization approach. As capital market assumption we simulate an imperfect market. To demonstrate the usefulness of the method, we address a case study of a merger of two IT-service companies. The related valuation and dimensioning of capacities is done by solving a multi-period newsvendor model under stochastic demand. The demonstrated nonlinear framework is shown to be suitable for a wide range of business valuation tasks.