test3 - FBE421 PROFESSOR BRIGGS PRECEDENT TRANSACTIONS...

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8/23/2010 1 FBE 421 P ROFESSOR B RIGGS Precedent Transactions Analysis P RECEDENT T RANSACTIONS A NALYSIS Summary of Precedent Transactions Analysis Precedent transactions analysis (“transaction comps”) is a multiples based valuation approach broadly used in the financial industry for a broad range of purposes, most notably M&A transactions and restructuring. Foundation based on a premise that the value of a company, division, business, or collection of assets (“target”) can be derived from multiples paid for comparable companies in prior M&A transactions. Challenges of determining appropriate comparable transactions Recent transactions (past 2 3 year) typically more relevant than obsolete transactions Provides higher multiple range than trading comps Control premiums Synergistic effects
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8/23/2010 2 P RECEDENT T RANSACTIONS A NALYSIS Overview of step by step approach Step I Study the Universe of Comparable Acquisitions Step I. Study the Universe of Comparable Acquisitions Step II. Locate the Necessary Deal Related and Financial Information Step III. Spread Key Statistics, Ratios, and Transaction Multiples Step IV. Benchmark the Comparable Acquisitions Step V. Determine Valuation P RECEDENT T RANSACTIONS A NALYSIS Step I. Select the Universe of Comparable Acquisitions Screen for Comparable Acquisitions Examine as many potentially relevant transactions as possible using M&A databases, target’s history, universe of comparable companies, fairness opinions and research reports Examine Other Considerations Understand the prevailing market and sector conditions at the time of each selected relevant transaction to evaluate the ability and cost of acquisition financing Consider the impact of bubbles on M&A activity and relevance of each transaction to the target’s current situation
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8/23/2010 3 P RECEDENT T RANSACTIONS A NALYSIS Step I. Select the Universe of Comparable Acquisitions Examine Other Considerations Scrutinize the deal dynamics surrounding each selected transaction Assess the acquirer’s intentions and corresponding effects on purchase price Strategic buyer vs. financial sponsor Understand the sale process, circumstances, and method of purchase for the transaction Auctions vs. negotiated sales Cordial vs. hostile environments Stock vs. all cash transactions P RECEDENT T
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  • Fall '07
  • Plotts
  • Database transaction, Spread Key Statistics, Precedent Transactions, comparable acquisitions, III. Spread Key, Step III. Spread

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