Guys need an answer asap. Can Comparable Transactions have lower valuation than Comparable Companies?
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Generally no, if comparable transactions have lower valuation than comparable companies, that implies that generally companies in the industry is acquired at a discount than their publicly trade market cap which is very uncommon.
But arguably, it could also happen if comparable transactions are older data and the industry has recently seen uptick in premium increasing their current public valuation.
Disagree with the first part, second part is a far more accurate reason and the only one that should be used in an interview. I recon 99% of the time it will be due to a difference in market conditions.
Mind explaining why? Essentially first part is just alluding to the fact that most acquisition is done with premium added on top of its public valuation, hence why precedent transaction yields higher multiple (barring drastic changes in multiple that is).
What the above said. Precedent transactions are harder to find and maybe outdated data, but transactions are acquired at a premium which makes it the highest exit enterprise value and most realistic scenario compared to relative multiples and mostly DCF.
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