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You could realistically apply it to everything deemed a “transaction” with precedents, since it’s more a concept of looking to historical examples of how a transaction was priced and/or worked than any one specific process that’s used
Used very often in fairness opinions. In my group we also use them for those overview ppt pages to talk about multiples/trends over time, either during pitching or update discussions with clients.
Precedent transaction analysis is a very vague term. All it means is that you are looking at past M&A. A couple of potential use cases:
1) If you're doing a debt raise, you may be able to look at precedent take-privates to gauge what leverage levels are typical in the last few years.
2) If a client asks you some vague question like, "How have valuations in this sector been affected by the macro disruption in 2022?" you can look at precedents to gauge how the multiples have trended.
3) You can also benchmark a wide variety of stats beyond typical multiples analyses in M&A, e.g., deal fees, breakup fees, etc.
4) If you are trying to figure out who is actively expanding their business in a space, you can look at precedent transactions to find frequent acquirers.
5) You can also find deal advisors if you are trying to find which investment bank is active in a space.
I used it to benchmark price of ships and niche hotels. For ships for example I used price/berth and did a regression vs ship age. Quite helpful to show to IC that age affects price (I know it’s obvious but you see it statistically) while size doesn’t really matter much as long as they are comparable ships (eg not hyper luxury vs mass market).
Above covered it well but to succinctly put it, if you’re valuing a company you’ll likely want to see what it could trade at given it almost always implies a premium to any valuation methodology you apply so it covers just yet another data point for you to use. Often when a competitor or adjacent company to a client gets sold, the client will want to know what their valuation might be if they were to receive an unsolicited offer or consider running a sale process.
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