Valuation of Routine Companies with Special Consideration of the Business Specificity (Probability of Termination)

In this study the authors have empirically analysed the lifetime of so-called routine companies by considering around 60,000 companies from the Orbis database. The study does not show a significantly different lifetime of routine companies compared to non-routine companies. However, for routine companies, one may assume an annual termination probability between 5% and 7% when valuing such a company.