Trading comps versus precedent transactions
| Feature | Trading Comps | Precedent Transactions |
|---|---|---|
| What’s valued | Minority stake (market price) | 100% ownership (control premium included) |
| Premium | None — market price | Typically 20–40% above trading price |
| Timeliness | Current market conditions | Historical — deal may be years old |
| Data availability | Public, real-time | Limited to announced deals |
| Best for | Relative valuation today | M&A pricing, fairness opinions |
Choosing relevant precedent deals
Use precedent transactions from the last 2–3 years in the same sector. Older deals reflect different market conditions, interest rates, and competitive dynamics. Always note whether a deal was a strategic acquisition (higher premium) or financial (lower).
Find the control premium in a real deal
Think of a recent major acquisition in your sector. What multiple did the acquirer pay? How does it compare to the target’s pre-deal trading multiple? The difference is the control premium.
Reading the gap as a control premium
A company trades at 10x EV/EBITDA. Recent precedent transactions in the same sector show 13–15x. What’s a reasonable takeaway?
Control price versus minority price
Should one recent deal set the multiple
A strategic buyer paid 18x EBITDA for Company Y. Now you're valuing Company Z (same industry, similar scale). Is 18x the right multiple to use?
Check your understanding
Sit with the ideas.
Public peers trade at 12x EV/EBITDA. Recent acquisitions in the sector occurred at 16x EV/EBITDA. Your target has EBITDA of $200M. What is the implied value range?
Why: