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    Valuation Method: Precedent Transaction Analysis-: Selecting Comparable Transaction, Spreading Comparable Transaction

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    LAMOUCHI RIM
    The document discusses the precedent transaction analysis valuation method. It involves selecting comparable past transactions and analyzing their valuation multiples to determine a range for valuing a company. Key steps include determining relevant precedent deals, selecting appropriate comps based on business characteristics, analyzing equity and enterprise value multiples, spreading the comps into an easy-to-read format, and applying the valuation multiples to establish a range for the company being valued while avoiding common pitfalls.

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    Valuation Method: Precedent Transaction Analysis-: Selecting Comparable Transaction, Spreading Comparable Transaction

    Uploaded by

    LAMOUCHI RIM
    41 views18 pages
    The document discusses the precedent transaction analysis valuation method. It involves selecting comparable past transactions and analyzing their valuation multiples to determine a range for valuing a company. Key steps include determining relevant precedent deals, selecting appropriate comps based on business characteristics, analyzing equity and enterprise value multiples, spreading the comps into an easy-to-read format, and applying the valuation multiples to establish a range for the company being valued while avoiding common pitfalls.

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    The document discusses the precedent transaction analysis valuation method. It involves selecting comparable past transactions and analyzing their valuation multiples to determine a range for valuing a company. Key steps include determining relevant precedent deals, selecting appropriate comps based on business characteristics, analyzing equity and enterprise value multiples, spreading the comps into an easy-to-read format, and applying the valuation multiples to establish a range for the company being valued while avoiding common pitfalls.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    41 views18 pages

    Valuation Method: Precedent Transaction Analysis-: Selecting Comparable Transaction, Spreading Comparable Transaction

    Uploaded by

    LAMOUCHI RIM
    The document discusses the precedent transaction analysis valuation method. It involves selecting comparable past transactions and analyzing their valuation multiples to determine a range for valuing a company. Key steps include determining relevant precedent deals, selecting appropriate comps based on business characteristics, analyzing equity and enterprise value multiples, spreading the comps into an easy-to-read format, and applying the valuation multiples to establish a range for the company being valued while avoiding common pitfalls.

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    of 18

    VALUATION METHOD:

    PRECEDENT TRANSACTION
    ANALYSIS-
    SELECTING COMPARABLE
    TRANSACTION,
    SPREADING COMPARABLE
    TRANSACTION.
    GROUP:3
    Members :
    1. Abhilasha 04
    2. Anushka 12
    3. Smriti Jha 64
    4. Sunny 66
    5. Aayushi Priti 71
    CONTENT:
    • VALUATION METHOD
    • PRECEDENT TRANSACTION ANAYSIS
    • WHY USE PRECEDENT TRANSACTION ANALYSIS
    • SEARCHING PRECEDENT TRANSACTION ANALYSIS
    • SELECTING THE APPROPRIATE TRANSACTION
    • ANALYSIS OF VARIOUS MULTIPLES
    • PROS AND CONS OF PRECENDENT TRANSACTION
    • SPREADING COMPS
    • STEPS TO SPREAD COMPS
    • PITFALLS
    VALUATION METHOD
    Valuation is a process of determining the
    present value of asset. But here it is used to
    value a company. There are three methods of
    valuing of company:
    1. Comparable Transaction Analysis
    2. Precedent Transaction Analysis
    3. Discounted Cash Flow Analysis
    PRECEDENT TRANSACTION ANALYSIS
    Precedent Transaction Analysis (sometimes called “historical
    transaction”) is one of the major company valuation
    analyses done in investment banking. This is a historical
    valuation method where you will be comparing past
    transactions in order to gauge current valuation of your
    company. In this exercise we will break down the steps used
    in precedent transaction analysis.
    • Determining the Relevant Transaction
    • Determining to multiples to measure
    • Collecting the data
    • Spreading the Comps
    WHY USE PRECEDENT TRANSACTION?
    • To value a private business that does not have
    public trading comparables.

    • To provide fairness opinion to a Board of director.

    • To identify potential bidders.

    • To evaluate the market demand for acquiring the


    company.
    SEARCHING FOR PRECEDENT
    TRANSACTION
    • Previous valuation analyses
    • Public tender documents and merger proxy
    statements.
    • SDC database
    • Capital IQ Fact set
    • News internet research
    • Equity research
    SELECTING THE APPROPRIATE
    PRECEDENT TRANSACTION
    • Business Characteristics
    • Financial outlook
    • Time of the deal
    • Location of the target.
    ANALYSIS OF VARIOUS MULTIPLES
    • There are mainly two types of valuation
    multiples:
    1. Equity Multiples
    2. Enterprise value Multiples
    EQUITY MULTIPLES
    It is mainly used for investment decision.
    Some of the Equity Multiples are:
    • P/E Ratio
    • Price / Book Ratio
    • Dividend Yield
    • Price / sales
    ENTERPRISE VALUE (EV) MULTIPLES
    • This is used when decision are about Merger
    and Acquisitions. Some of the EV multiples
    are:
    • EV /Sales
    • EV/ EBITDA
    • EV/ Investment capital
    PROS OF PRECEDENT TRANSACTIONS

    • Based on publicly available information.

    • Provide guidance to assess what a buyer may be willing to pay


    for the business.

    • Can reveal valuable information.

    • Useful in M&A negotiations and discussion.


    CONS OF PRECEDENT TRANSACTION
    • Public data is based on past transaction.
    • Information can be misleading.
    • Factors may affects the multiples such as
    governance issues, specific agreement, and
    intangible values.
    • Precedent transaction dynamics are rarely
    perfectly comparable.
    SPREADING COMPS
    • It means calculating and displaying them in an
    easy-to-read fashion, typically in spreadsheet.
    • The Comps table should include Mean,
    Median, and Max statistics for each metrics in
    each year to provide a valuation range for the
    company you are valuing.
    STEP TO SPREAD PRECEDENT
    TRANSACTION ANALYSIS
    • Search for relevant transaction
    • Analyze and refine the available transaction
    • Determine a range of valuation multiples
    • Apply the valuation multiples to the company
    in question
    • Graph the results in a football field
    PITFALLS TO AVOID WHEN USING
    PRECEDENT TRANSACTION
    • Lack of due diligence

    • Not having a favourable sale agreement or


    purchase contract

    • Not establishing a seller Non-Compete


    agreement
    CONCLUSION
    THANK YOU!

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