Module II· Precedent TransactionsAdvanced
Question
Which five most common precedent-transaction mistakes should you avoid in an interview?
Answer
- Mixing strategic and financial-buyer deals without separate buckets → a meaningless multiple.
- Including deals 5+ years old → doesn't reflect the current market.
- Using the equity purchase price instead of EV → forgetting net debt.
- Ignoring synergies → strategic multiples wrongly read as standalone pricing.
- Not excluding distressed sales → the median is skewed downward.
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Pitch tip
If an MD asks 'Where could your precedents go wrong?', list these five points. Bonus: 'I also check macro conditions at the deal time — 2021 hot-market multiples were 25%+ above the long-run average, so I would discount them.' A top-quartile answer that signals market understanding.