The IUP Journal of Applied Finance, Vol. 15, No. 10, pp. 63-88, November 2009
27 Pages Posted: 7 Nov 2007 Last revised: 15 Nov 2009
Date Written: June 1, 2007
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.
Keywords: Corporate finance, firm, rating, ranking, expert system, fuzzy, evaluation
JEL Classification: G34, G30, G31, G12, C88, C63
Suggested Citation: Suggested Citation
Malagoli, Stefano and Magni, Carlo Alberto and Mastroleo, Giovanni and Buttignon, Fabio, Rating and Ranking Firms with Fuzzy Expert Systems: The Case of Camuzzi (June 1, 2007). The IUP Journal of Applied Finance, Vol. 15, No. 10, pp. 63-88, November 2009. Available at SSRN: https://ssrn.com/abstract=1027935