Quick Links:

Learn DCF and LBO Modeling

Learn MS Excel for Financial Services

Submit an Article

Bankingorbust in the News

Sample Interview Questions

2008 M&A Deals You Should Know

People in Finance You Should Know

Precedent Transactions Analysis

A valuation based on precedent transactions arrives at a valuation based on what similar companies in the target company's peer group were bought and sold for.

CLICK HERE to learn how to build COMPLETE earnings projection, DCF and LBO models in Excel - from scratch

Steps:
1. Compile list of relevant transactions
2. Calculate relevant financial ratios
3. Establish valuation range based on calculated multiples
4. Apply valuation range to target company

Transactions should have relevant attributes:
• Industry group
• Timing - Transactions should be recent (typically no more than five years)
• Business mix (products, markets served, distribution channels, etc)
• Geographic location
• Size (revenues, assets, market cap)

Sources of precedent transactions:
• Internal firm resources
• Databases (e.g. Capital IQ, Thomson)
• SIC/NAICS code screen

2-4. See Comparable Companies Analysis

Click here to see a finished product