How do you perform a precedent transaction analysis?

Precedent Transaction Analysis Walk-through

  1. Step 1: Selecting the Universe of Transactions. The first step is selecting your universe of historical transactions you will be using in your valuation.
  2. Step 2: Locating the Necessary Financials.
  3. Step 3: Spreading the Key Trading Multiples.
  4. Step 4: Determining Valuation.

What is transaction valuation?

‘Transaction Value’ is the price actually paid or payable for supply of goods and/or services. This is subject to dual condition as mentioned below: Supplier and recipient of the supply are not related; and. Price is the sole consideration for the supply.

What are precedent comps?

Precedent transactions analysis, or sometimes called “M&A Comps,” is an investment banking valuation methodology that uses multiples paid in mergers and acquisitions of similar businesses as a proxy to value a company.

What are the three valuation methods?

What are the Main Valuation Methods? When valuing a company as a going concern, there are three main valuation methods used by industry practitioners: (1) DCF analysis, (2) comparable company analysis, and (3) precedent transactions.

What are precedent transaction multiples?

Transaction multiples are also known as “Precedent Transaction AnalysisPrecedent Transaction AnalysisPrecedent transaction analysis is a method of company valuation where past M&A transactions are used to value a comparable business today..”

How does precedent transactions analysis differ from comparable companies analysis?

The main difference between the two is that public comps is based on the company’s market cap; i.e. how much the market is paying for the company’s stock vs precedent transaction comps actually uses what one party paid for the company they acquired.

Why do precedent transaction multiple and comps differ?