Valuation: Comps & Precedents
Why do precedent transaction multiples usually exceed comparable company multiples for the same business?
Model answer
Because acquisition prices include a CONTROL PREMIUM that public trading prices do not. When you buy a whole company you pay extra for control (ability to direct strategy, capital allocation, and…
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More from Valuation: Comps & Precedents
- What are the main valuation methodologies?
- Why might trading comps and precedent transaction comps give different values?
- Why is EV/EBITDA often preferred over P/E for comparing companies?
- What are the three primary valuation methodologies a banker uses, and in one line each, what is each based on?
- Which of the standard valuation methodologies tend to produce the HIGHEST and the LOWEST values, and why?
- Walk me through how you perform a comparable companies analysis.
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