Precedent Transaction Analysis: The Full Guide and Excel Examples

Learn more: breakingintowallstreet.com/co...
In this tutorial, you’ll learn about Precedent Transaction Analysis, including how to find comparable deals in the industry of the company you’re valuing, how to select the metrics and multiples, how to complete the analysis manually, and how to interpret the set of transactions and the implied values they produce.
Table of Contents:
For all files and resources, please see:
breakingintowallstreet.com/kb...
0:00 Introduction
1:38 Part 1: Why Use Precedent Transactions?
4:28 Part 2: Finding and Screening for Transactions
9:26 Part 3: Picking the Metrics and Multiples
12:23 Part 4: Applying the Multiples to Value Your Company
14:11 Part 5: Doing the Analysis Manually
16:46 Part 6: Trade-Offs of Precedent Transactions
20:48 Recap and Summary

[@VinaySingh-rv1mq]

Thanks Brian for this valuation method, definitely clear some unknown facts about it

[@financialmodeling]

Thanks for watching!

[@kesyaagnesmaria1441]

Thank you for sharing. Really appreciate it, Sir.

[@financialmodeling]

Thanks for watching!

[@alexandralyu836]

Thanks for sharing, Brian!

[@financialmodeling]

Thanks for watching!

[@pedropacheco9608]

I love you Brian. May God bless you!

[@financialmodeling]

Thanks for watching!

[@saralyn4062]

This was so helpful- thank you

[@financialmodeling]

Thanks for watching!

[@quintondouse7237]

Hey Brian, hope you are doing well. I have a question for you regarding the specific multiple that should be used for valuing a private company in an LBO scenario. If you're tasked with finding the entry multiple to pay for LTM EBITDA for a private company and you're given an output of comps (trading or precedents), should you always use the median multiple?

[@financialmodeling]

You could use higher or lower multiples (e.g., 25th or 75th percentile) if the company is performing better/worse than the median of the set. But you would need some pretty good justification for this because most people just expect to see the median used.

[@xZypEi]

Thanks Brian! I have had a job interview for an M&A Manager role in a European corporate and was asked about the downsides of precedent transactions. Great to see that I was actually doing pretty well. I have also mentioned that the multiple might depend on the type of company the acquirer is, i.e. PE or corporate (assuming that a corporate would pay more due to synergies and a PE would pay less since it might be a restructuring case). Thanks to your videos, I was invited to a second round (a case study). Let's see what comes next! Do you have any ideas what they could ask?

[@financialmodeling]

Congrats. Second rounds are usually more of the same, but the selection process depends heavily on culture/fit since most people will be fairly capable technically by that point.

[@xZypEi]

@@financialmodeling thanks! I was just wondering because they said it's going to be a case study (and I have never been into case studies before)

[@financialmodeling]

For all the files and resources and a written version, please go to: breakingintowallstreet.com/kb/valuation/precedent-transaction-analysis/

[@aleksandramisiaszek3111]

Hi! Is there any way we could value a company without knowing how many diluted shares they have?

[@financialmodeling]

You could just use the basic share count.

[@sonerguney3225]

Very good. Can we have the excel file for a download.

[@financialmodeling]

breakingintowallstreet.com/kb/valuation/precedent-transaction-analysis/ --> "Files & Resources"

[@brenaj4891]

any good alternative for capitalIQ? preferrably free

[@financialmodeling]

Finviz is good for screening public companies.

[@SebastianRocks1234]

I am following, I am not sure what to do after I get the transactions on capitaliq. Can anyone please help? I understand what to do, but I want to find the multiple myself.

[@financialmodeling]

I don't understand your question. If you use Capital IQ to find the transactions, all the multiples should be listed there (???).