Going through some work during training prior to IB analyst start and was wondering if someone could walk me through this.
I was told (by a fellow analyst) that you want to disregard financial sponsors deals in your acq comps because the intent is different when determining price point. I do not understand this, particularly because it is 1) an important and relevant data point and 2) it likely would show you your floor pricing for a deal.
Could anyone help me out with his thought process and rationale?
I would say you don't disregard them but you should just be aware of the type of acquiror. Then you can be prepared to explain differences in purchase price due to synergies, etc.
Like the poster above me mentioned, my understanding is that a financial sponsor's purchase price (and thus, multiple) would be less than that of a strategic acquirer. The reason being that a financial sponsor is looking to turn around the business and sell it after a few years, where as a strategic can realize synergies from the acquisition which may increase productivity, cut costs etc. which the strategic would be willing to pay more for as it would add more value to their business over the long run.
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