Global M&A News, Advisor and Investor Profiles

Comparable Transaction Analysis


Comparable Transaction Analysis

Business valuation techniques are commonly classified into one of three approaches: the income approach, the asset-based approach, and the market approach. Comparable Transaction Analysis is a common market approach for determining the value of a company by examining and comparing previous acquisitions of companies similar to the target company. Scope of the analysis is to determine the multiples of key income statement items (usually revenue, EBIT and EBITDA) implied by previous transactions. This is basically done by dividing purchase price, or Enterprise Value, by income statement item. These multiples are then applied to the income statement of the target company. The greatest hindrance to preparing a meaningful Comparable Transaction Analysis is the limited availability of financial data regarding past transactions between private companies. In addition, the most relevant comparable transactions may be outdated or fall into a period of significantly different M&A climate (e.g. 1999 vs. 2009). Despite its shortcomings, Comparable Transaction Analysis remains a standard valuation technique, which is generally used in conjunction with other techniques, such as Discounted Cash Flow and Comparable Company Analysis.

See also: Comparable Company Analysis

Latest News

Is privately-owned health care treatment services provider - Vardaga, the best choice for your own family's therapy, healing and assisted...

It seems more and more companies are offering Business Valuations services...

Many business owners pour their proverbial “blood, sweat and tears” into their business. To them, the business represents far more than a...

After spending over fourteen years in the mergers and acquisitions services industry, Brian Mazar, CEO of American Fortune Mergers &...

Companies Often Make Common Mistakes That Can Negatively Impact Mergers & Acquisitions (M&A) Transactions. Successfully completing a...

Forex trade systems provide a plan, structure and rules to follow. There are numerous systems to choose from, here is a brief guide to some...

Company Profiles