Which method would yield higher valuations?
I know the answer. Precedent transactions because it includes the control premium. At a recent interview I was asked about the following:
"What you say is right, but what if there was no control premium?"
Should I suppose it had to do with saying they would be equal to Comps?
Synergies also factor into precedent transactions valuation. I would also point out that depending on assumptions, the DCF can yield the highest valuation.
I thought synergies were somehow embedded in the premium?
I agree with above. Cost savings is still worth a premium as well.
Highest --> Lowest Valuation
1) Precedent
2) DCF (models are overly optimistic)
3) Comps
4) Anything market related (multiples or market value)
My question is, if Premium = 0; somehow a merger of equals. Would that imply Precedent = Comps?
But for precedents you are most likely looking at deals that did include a control premium.
So if you managed to find a deal w/o one then I guess it would be nearly equal to comps but it seems pretty rare.
All valuation methods, if done correctly, should yield valuations that closely tie together.
I know. It was however related to an interview question I stumbled to answer![]()
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