1. Transactions Analysis Process
Similar to comparable companies, we used the same of three steps when conducting
a precedent transaction analysis, select appropriate transactions, enter
the relevant data, and finally value the target company using the selected
multiples. Determining appropriate transactions is also the most part of
a transaction comps analysis. Once the relevant transactions have been selected,
then we must find and enter the appropriate data, this is normally more
complicated in comparable companies as the data may be harder to find depending
on the transaction. We usually have to source data from multiple different
filings, press releases, proxies, information circulars or even investor
presentations. As we mentioned earlier, transaction comps usually produce
the highest valuation due to the presence of a control premium.
A control premium is necessary to induce shareholders to sell the business.
You can also think of the control premium as a payment to selling
shareholders for the target company's portion of future synergies.
2. Let's practice!