Valuation of private firms in the Icelandic tourism sector : The case of an Icelandic hotel group

Abstract

The purpose of this thesis was to explore whether traditional private firm valuation techniques could be used to value a private firm in the Icelandic hotel market. The first part of this thesis consists of an overview of the different methods used to value private firms, how they are implemented and the inputs required. The methods are for the most part the same that are used to value public firms. But the difference between them lies in the fact that there is not as much data available on private firms as there are on public firms. In the second part of the thesis, valuation was done on Íslandshótel hf. using free cash flow to firm as the discounted cash flow method and EV/EBITDA multiples for the relative valuation. Results of the valuation show that there is a substantial difference between the discounted cash flow and the relative valuation but the discounted cash flow model is quite sensitive to changes in input factors.