Valuation of Goodwill for an Engineering Firm

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

In the Table 3 the first 5 variables (from Ability, Skills, to Education) and their values are repeated, probably as a mistake.

Author Response

Hi Reviewer 1.

We are grateful for your valuable time and your insightful comments on our paper. Thank you for pointing out the duplication the Table 3. We have been able to incorporate suggestions provided by the reviewers. Updated manuscript has been uploaded for your review.

In addition to the above comments, all spelling and grammatical errors pointed out by the reviewers have been corrected.

We look forward to hearing from you in due time regarding our submission and to respond to any further questions and comments you may have.

Thanks!

Reviewer 2 Report

Comments and Suggestions for Authors

In this paper, the authors propose a holistic approach for the valuation of goodwill for an engineering firm. In particular, they base their reflection on Game Theory instruments to highlight the conflict surrounding the goodwill evaluation between buyers and sellers of an engineering firm.  

 

My comments are the following.

The first part of the paper, while mainly based on other works, is well-organized and nice to read. Instead, I have some doubts on the second part of the paper, in which Game Theory is put on the ground (say from line 268 onward). There is a long discussion there which is based on the Graph Model for Conflict Resolution (GMCR). I have several problems with it, as I try to explain. First, the long introduction of this method seems highly disconnected with the previous part of the paper. It is a textbook presentation of this method whose connections – in terms of style, arguments, and purpose – with the previous part of the paper is hard to find. The authors should not go into useless details, but just present the method in such a way that a typical reader of JRFM could understand. This is not the case in the present version of the paper. Second and foremost: why choosing the GMCF to illustrate the present problem (i.e. the conflict between buyers and sellers of an engineering firm)? The same problem could be (and should be, in my opinion) illustrated with a simply 2x2 matrix and making use of the simple Nash Equilibria concept. In the current version there are three pages presenting in a rather complicated way the GCCF while the discussion around Table 4 should be done by using a standard Nash Equilibrium concept. Furthermore, let me add that the actual discussion about Table 4 and Figure 4 is not clear. For example, what the meaning of the Pbuyer set and the Pseller set in the caption of Figure 4?

To summarize: my suggestion is to reorganize and streamline the discussion grounded on Game Theory and avoid making use of GMCF.

 

 

Author Response

We are grateful for your valuable time and your insightful comments on our paper. Thank you for remarks on the Game Theory and GCCF content.

The authors have simplified the explanation of the game theory method and have instead opted for a description of the stability concepts that does not rely on set theory or game theory conventions. The writing has also been revised to provide more of a smooth transition from the other aspects of the paper to the section describing the purchase “game.”

The authors have added the following phrase which explains the preference vectors, Table 4, and the graphics in Figure 4.

“The buyer has the mutually exclusive options to purchase or not purchase the company while the seller has the mutually exclusive options to inflate the value of the goodwill, as illustrated in Table 4. The combinations of each player’s decisions give rise to states A, B, C and D. Both the strategy to “buy” on the part of the buyer and to “inflate” on the part of the seller are one-way moves which means that once the option has been selected it cannot be undone. The preferences of each of the DMs are reflected by the sets PBuyer and PSeller which represent, in decreasing order, the preferences of the buyer and seller. For example, the buyer’s most preferred state is C, where they purchase the company without an inflated goodwill value, followed by D, where they do not purchase the company and the goodwill is not inflated. In the graph model shown, the buyer’s moves are illustrated by solid arrows, while the seller’s moves are dashed arrows.”

We have been able to incorporate suggestions provided by the reviewers. Updated manuscript has been uploaded for your review. In addition to the above comments, all spelling and grammatical errors pointed out by the reviewers have been corrected.

We look forward to hearing from you in due time regarding our submission and to respond to any further questions and comments you may have.

Reviewer 3 Report

Comments and Suggestions for Authors

This research takes a novel approach to goodwill valuation, using a game-theory-based decision tool. It is an interesting study, but in order to be published, it should state more clearly in the introduction what the goal of the research is and what the additional value is. Also, in the Conclusions, it should state the most noteworthy findings and compare them to those acquired in similar studies, in order to highlight the study's contribution to the field's literature.

Author Response

Hello Reviewer 3,

Thanks for your valuable time and feedback. 

The authors have made all the necessary corrections and changes as suggested to the manuscript.

The authors have added the following to the introduction and conclusion to answer the authors’ concerns.

“Negotiating a value for Goodwill is a conflict between two decision makers, the buyer and seller. Determining a fair value of Goodwill will impact whether a sale is completed and what the health of the future company looks like. Game theory methods have been applied to numerous economic, environmental and political conflicts and in this paper, will be applied to the determination of Goodwill.”

And

“The game theoretical method shows the importance of collaboration in delivering a Goodwill outcome that satisfies both buyers and sellers. The ability of coalitions is expected, as it has been illustrated in numerous game theory methodologies (Kilgour et al 2001).”

Reviewer 4 Report

Comments and Suggestions for Authors

The manuscript is excellently conceived and applicable to both science and practice — support for authors to continue with the realization of similar research. The only suggestion to authors is to use more current references in the future, not older than five years.

Author Response

Hi Reviewer 4.

We are grateful for your valuable time, support, and your insightful comments on our paper. Your observation is remarkable about some older references. The authors used important older references in this field to build the subject and to refer vital work in this field. This is our subject building (opening) manuscript in this research and it was important to use older refences to build the subject. Any future work or similar work will use more current references.

We have been able to incorporate suggestions provided by the reviewers. Updated manuscript has been uploaded for your review.

In addition to the above comments, all spelling and grammatical errors pointed out by the reviewers have been corrected.

We look forward to hearing from you in due time regarding our submission and to respond to any further questions and comments you may have.

Round 2

Reviewer 2 Report

Comments and Suggestions for Authors

None.