Valuation differences between quoted and unquoted companies- empirical evidence from the UK

This paper focuses upon differences in the valuation of UK quoted and unquoted companies. It draws on empirical evidence over the period from 1991 to 1997. It commences with an overview of the published literature. This suggests a broad spectrum of valuation statistics ranging from very minor discounts for non-listed companies relative to their quoted brethren, up to a discount as high as 40%. The empirical analysis uses PE ratios, derived from the publication Acquisitions Monthly, in respect of non-listed, private companies selling out in takeover deals. These are compared with average PE ratios for quoted companies in Britain. A raw statistic of approximately 40% was found as the discount for non-listed firms relative to quoted companies. However, this is dramatically different when corrected for size. For size varying from less than GBP 0.5 million to about GBP 55 million, the discount ranges, respectively, from 16% to 6% with an average of around 10%. Regression equations relating size and PE ratio are presented.