July 15, 2018 at 6:10 am
#37176
Rohit Singh
Participant
Post being part of multiple M&As and PE deals, comparable transactions are the major (sometimes only) method used by the acquirers. Its just like you going to buy a house- the preferred method is looking at the most recent real estate transactions on $/sqft in that area to decide what to pay to the seller.
As most businesses are funded by combination of equity/ debt, EV/EBITDA should be used for comparable transactions. EV and EBITDA overcomes capital structure issues and also measures a company using profitability ( EBITDA) indicators.