Precedent Transactions Analysis
Also known as: Transaction Comps, Deal Comps, M&A Comps
Precedent transactions analysis values a company using the multiples paid in past acquisitions of similar businesses, capturing what real buyers have actually paid.
Precedent transactions analysis values a business by looking at the prices paid in completed acquisitions of comparable companies. Where comparable company analysis uses public trading prices, this method uses real deal prices, which usually include a control premium.
Why the multiples run higher
Acquirers typically pay more than the public market price to gain full control and to capture synergies. As a result, transaction multiples tend to sit above trading multiples, and they set a useful benchmark for what a company might fetch in a sale.
The catch
Deals happen at moments in time under specific conditions. A transaction from a hot market two years ago may say little about today, so the most relevant precedents are recent, similar in size, and in the same industry.