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Wall Street Prep IB Interviews Trading Multiples and Comps/Precedent Transaction Valuation continued - from IBI lessons and supplemented with online modeling resources$11.99
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Wall Street Prep IB Interviews Trading Multiples and Comps/Precedent Transaction Valuation continued - from IBI lessons and supplemented with online modeling resources
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Course
Wall Street Prep
Institution
Wall Street Prep
Wall Street Prep IB Interviews Trading Multiples and Comps/Precedent Transaction Valuation continued - from IBI lessons and supplemented with online modeling resources
Wall Street Prep IB Interviews Trading
Multiples and Comps/Precedent Transaction
Valuation continued - from IBI lessons and
B
supplemented with online modeling resources
LU
YC
What is precedent transaction analysis? - ANSWER Precedent Transaction Analysis
(sometimes called "historical transaction") is one of the major company valuation
analyses done in investment banking
D
It's a HISTORICAL valuation method where you compare PAST transactions in order to
TU
gauge CURRENT valuation of your company.
What characteristics do you use to create a universe of transactions? - ANSWER You
ES
will never find a perfect precedent transaction because no company is ever 100% similar
but you will be able to narrow down your search using the following characteristics for
the target company:
C
A
, What are the key financials needed in a precedent transaction analysis? - ANSWER
Necessary financials typically include:
1) Total deal amount paid by the acquirer --> this will be your EV!
2) Target Company Earnings per Share (EPS)
3) Target Company Market Capitalization (Deal Amount - Net Debt)
4) Target Company Earnings before Interest, Taxes, Depreciation, and Amortization
(EBITDA)
B
5) Target Company Total Revenue
LU
There is no better source for this than public filings on sec.gov. This will take longer
YC
pulling this information by hand vs. a database but it's the best way.
What multiples will you analyze/"spread" in a precedent transaction analysis? -
D
ANSWER You will be analyzing comparable multiples such as:
1) EV/Sales
TU
2) EV/EBITDA
3) P/E ratio --> AKA Stock Price/EPS
4) Market Cap/Book Value
ES
How do you determine the financial valuation of your target company using the precedent
transaction analysis method? - ANSWER Once you have spread the multiples for
C
your custom universe is to use this information for determining valuation.
A
Using the information in step 3, you will calculate and use the financial multiples of your
"universe" to determine your target's valuation.
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