Module II· Interview Essentials — ValuationBasic
Question
Walk me through Precedent Transactions.
Answer
1-minute answer
- Transaction universe: the last 3–5 years, similar size + sector + geography
- Gather EV at closing
- Compute multiples: EV/LTM EBITDA and EV/NTM EBITDA at announcement
- Median + range by sector and strategic vs. financial buyer
- Apply to the target
Important
Precedents include a control premium (25–35%) → higher than trading comps. Synergy expectations are priced in.
Pitfalls to mention
- Old transactions are often no longer market-relevant
- Strategic deals carry higher multiples than sponsor deals