Rating and Ranking Firms with Fuzzy Expert Systems: The Case of Camuzzi.

This paper presents a real-life application of a fuzzy expert system aimed at rating and ranking firms. Unlike standard Discounted Cash Flow (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 prospective 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 value-generating power of the target firm inclusive of synergies with the bidder (here named Strategic Enterprise Value). The system may be used for rating and ranking firms operating in the same sector. A regression analysis, using hostile takeover 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. [ABSTRACT FROM AUTHOR]