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The first is comparable company analysis (CCA), also known as “comps”. The second is precedenttransactionanalysis, known as “precedents” and also called a comparable transactionanalysis (CTA). Not all of the necessary data is publicly available when conducting a precedenttransactionanalysis.
The first is comparable company analysis (CCA), also known as “comps”. The second is precedenttransactionanalysis, known as “precedents” and also called a comparable transactionanalysis (CTA). Not all of the necessary data is publicly available when conducting a precedenttransactionanalysis.
Market-based approaches gauge a company’s value by analyzing comparable market transactions and valuations. This method is common in industries where valuations are commonly expressed as a multiple of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) or Earnings Before Interest and Taxes (EBIT).
Its calculation involves the subtraction of capital expenditures, changes in working capital, and taxes from the company's Earnings Before Interest and Taxes (EBIT). Common multiples used in this comparative analysis include EV to EBIT, Price to Cash Flow, and PE Ratio. What is PrecedentTransactionalAnalysis?
Stepping back and reflecting on the issue, the main challenges to deriving a fair business valuation seem to be 1) misunderstanding or bad use of valuation techniques, 2) gathering or using the wrong information for inclusion in the analysis and 3) oversight of extraneous factors or ‘the bigger picture’ as it were. Conclusion?
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