Module II· Interview Essentials — ValuationIntermediate
Question
Which valuation method typically produces the highest value, and why?
Answer
Typical hierarchy
Precedent Transactions > DCF > Trading Comparables. Reasoning:
- Precedent transactions include a control premium of 25–35% — a buyer pays a premium over the market price for majority control.
- DCF can vary — at the high end with aggressive growth assumptions or a low WACC, in the middle with conservative assumptions.
- Trading comparables reflect minority-stake pricing — no control premium, so lower. Exceptions: (a) a strategic buyer with synergies can push DCF + synergies-DCF above precedents. (b) For distressed targets, DCF can fall below the trading-comps range. (c) In bull markets, the trading-comps multiple can be inflated and exceed the precedent range.
Deep diveShow more details
Pitch tip
'In the Football Field we typically show trading comps at the low end, DCF in the middle, and precedent transactions at the high end — plus a 'synergies-on-top' bar as the strategic-buyer premium.'