Module II· Trading ComparablesAdvanced
Question
How do you defend your comp-set selection in an interview when an MD says 'Why these 8 comps and not these other 5'?
Answer
A structured defense in four points:
- Initial universe: 'We started with GICS industry code XXX, 25 European mid-caps.'
- Filter logic: 'We excluded 7 for insufficient liquidity, 4 for business-model heterogeneity, and 3 for distress.'
- Tier classification: 'Tier 1 (5 comps) are the closest peers — same end product, same geography. Tier 2 (3 comps) are broader peers — adjacent products or a different geography.'
- Rejection argument: 'The 5 comps you name — CompX has 60% auto exposure (our target has 5%), CompY is distressed, CompZ has no consensus coverage.'
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Pitch tip
In the interview, be prepared to know 3−5 alternative comps and have concrete reasons to reject each. Address the 'no, why not them' pre-emptively.