Precedent Transactions Analysis
Definition
Precedent transactions analysis ("deal comps") values a company using multiples paid in past M&A transactions for similar companies. The mechanics mirror trading comps, but the multiples are based on the price actually paid for control — announced deal EV over the target's LTM (or forward) metrics.
Because acquirers pay a control premium (historically often cited around 20-40% over the unaffected share price, varying widely by deal and cycle) and may price in synergies, precedent multiples usually sit above trading multiples and imply the highest valuation of the standard methodologies.
Limitations: deal data can be stale (multiples reflect the M&A and financing environment at the time), comparable deals may be scarce, disclosed terms can be incomplete, and every deal has idiosyncratic dynamics (competitive auctions, distressed sellers, strategic urgency).
Why interviewers ask
"Why do precedent transactions usually give a higher valuation than trading comps?" (control premium and synergies) is a staple, as is defending which precedent deals are relevant. The trap is mixing announcement-date and current data, or treating a distressed or highly synergistic deal as a clean benchmark.
Related terms
Interviews don't test definitions — they test recall under pressure.
Drill 1,500+ real questions with spaced repetition. Free to start — 10 reps a day on the house.