Valuing private companies: a DEA approach

Traditionally, company valuation methods are based on discounted cash flows and liquidation values, but all have a number of known shortcomings. The application of data envelopment analysis (DEA) to finding comparable firms to the one under examination and predicting the market values of such companies is an extension of the market-based approach and is in contrast with other applications where DEA is used for assessing relative efficiencies. There are different approaches to DEA efficient and inefficient firms in this methodology.