What are the advantages of comparable transactions in the valuation for M&A?

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  • #35721
    Chris
    Keymaster

    When valuating businesses in Mergers & Acquisitions, what are the advantages doing so? How do I build a list? What are the factors/transaction variables to consider?

    #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.

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