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Precedents - Precedent Transaction Analysis FIN 461...

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Precedent Transaction Analysis FIN 461 Professor Thomas Boulton Rosenbaum and Pearl, Chapter 2
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Precedent transactions analysis Pros Market based Current Relativity Simplicity Objectivity Cons Market based Time lag Existence of comparable acquisitions Availability of information Acquirer’s basis for valuation Premise: Multiples paid in prior M&A transactions provide a relevant reference point for valuing a target.
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Precedent transactions analysis Similar in many ways to comparable companies analysis. Selection of an appropriate group of comparable acquisitions is the foundation for performing a precedent transactions analysis. Under normal market conditions, precedent transactions tend to provide a higher multiple range than comparable companies. Why?
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Precedent transactions analysis Steps: 1. Locate the universe of comparable acquisitions 2. Locate the necessary deal-related and financial information 3. Spread key statistics, ratios, and transaction multiples 4. Benchmark comparable acquisitions 5. Determine valuation
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