Valuation: Comps & Precedents
What are the main valuation methodologies?
Model answer
Three core approaches
- comparable companies (trading comps) - current multiples of similar public firms
- precedent transactions - multiples paid in past M&A deals
- discounted cash flow (DCF) - intrinsic value of projected cash flows. Others include LBO analysis (a floor for a financial buyer) and sum-of-the-parts.
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