Value a company using precedent transaction analysis by applying transaction multiples from past M&A deals, which include control premiums and synergies.
Precedent Transaction Valuation Calculator
Value a company using precedent transaction analysis by applying transaction multiples from past M&A deals, which include control premiums and synergies.
Input target company data and precedent transaction multiples
Formula
Estimated EV from Revenue = Target Revenue × Median Transaction EV/Revenue Multiple
Estimated EV from EBITDA = Target EBITDA × Median Transaction EV/EBITDA Multiple
Estimated EV from EBIT = Target EBIT × Median Transaction EV/EBIT Multiple
Average Estimated EV = Average of Available Estimates
Precedent transaction valuation estimates enterprise value by applying transaction multiples from past M&A deals to the target company's financial metrics. Transaction multiples reflect what buyers actually paid, including control premiums (typically 20-40%) and expected synergies, making them typically higher than trading multiples. This makes precedent transactions particularly useful for M&A and control transaction valuations.
Steps
Enter target company revenue.
Optionally enter target EBITDA and EBIT.
Enter median transaction multiples from precedent transactions (EV/Revenue, EV/EBITDA, EV/EBIT).
Review estimated enterprise values based on transaction multiples.
Additional calculations
Enter target company data and precedent transaction multiples to see additional insights.
The Complete Guide to Precedent Transaction Valuation: M&A Transaction Multiples Analysis
A comprehensive look at precedent transaction valuation using transaction multiples from past M&A deals to value companies, including control premiums and synergies.
Precedent transaction analysis values a company based on prices paid for similar companies in past M&A transactions, reflecting what buyers actually paid including control premiums and synergies.
Key Characteristics
Based on actual transaction prices, not market prices
Includes control premiums (typically 20-40%)
Reflects expected synergies from transactions
Useful for M&A and control transaction valuations
Typically higher multiples than trading multiples
Transaction Multiples
Transaction multiples are calculated from past M&A deals by dividing transaction enterprise value by target company financial metrics.
Common Multiples
EV/Revenue: Transaction EV divided by revenue
EV/EBITDA: Transaction EV divided by EBITDA
EV/EBIT: Transaction EV divided by EBIT
Selecting Precedent Transactions
Select transactions similar to the target in industry, size, growth, profitability, and transaction characteristics.
Valuation Calculation
Estimated EV = Target Metric × Median Transaction Multiple
Control Premiums and Synergies
Transaction multiples include control premiums and expected synergies, making them typically 20-40% higher than trading multiples.
Practical Application
Use precedent transactions for M&A analysis, control transaction valuations, and understanding what buyers pay for similar companies.
Conclusion
Precedent transaction valuation provides M&A-based company valuation using transaction multiples from past deals. These multiples reflect what buyers actually paid, including control premiums and synergies, making them typically higher than trading multiples and particularly useful for M&A and control transaction valuations. By selecting appropriate precedent transactions and applying median multiples to target company metrics, analysts can estimate enterprise value for control transactions.
FAQs
What is precedent transaction valuation?
Precedent transaction analysis (PTA) values a company based on prices paid for similar companies in past M&A transactions. It uses transaction multiples from historical deals, which reflect control premiums and synergies, making it useful for M&A valuation and control transaction analysis.
How does precedent transaction differ from comparable company analysis?
Precedent transactions use multiples from past M&A deals, which include control premiums and synergies, making them typically higher than trading multiples. Comparable company analysis uses current trading multiples from public markets, which don't include control premiums. Precedent transactions reflect what buyers actually paid for similar companies.
What are transaction multiples?
Transaction multiples are calculated from past M&A deals by dividing transaction enterprise value by the target company's financial metrics (revenue, EBITDA, EBIT). Common multiples include EV/Revenue, EV/EBITDA, and EV/EBIT. These multiples reflect what buyers paid, including control premiums and expected synergies.
How are precedent transactions selected?
Select precedent transactions based on: similar industry and business model, similar company size, recent transactions (typically last 3-5 years), similar transaction type (strategic vs. financial buyer), and comparable market conditions. Focus on transactions that closely match the target company to ensure relevant multiples.
Why are transaction multiples typically higher than trading multiples?
Transaction multiples include control premiums (typically 20-40%) that buyers pay for control, and synergies that buyers expect to realize. Trading multiples reflect minority interest values in public markets. This makes transaction multiples more appropriate for M&A and control transaction valuations.
How is estimated enterprise value calculated?
Estimated EV = Target Financial Metric × Median Transaction Multiple. For example: Estimated EV = Target Revenue × Median Transaction EV/Revenue, or Estimated EV = Target EBITDA × Median Transaction EV/EBITDA. Multiple estimates are averaged or a range is used for triangulation.
What is a control premium?
Control premium is the additional amount buyers pay above market price to acquire control of a company. Control premiums typically range from 20-40% but can vary widely. Precedent transactions include control premiums in their multiples, making them appropriate for valuing control transactions.
How recent should precedent transactions be?
Precedent transactions should typically be from the last 3-5 years to reflect current market conditions. Very old transactions may not reflect current market dynamics, multiples, or industry conditions. However, if relevant recent transactions are limited, older transactions can provide context if adjusted for market conditions.
Should I use median or average transaction multiples?
Median is generally preferred because it's less affected by outliers. Some transactions may have very high multiples due to unique factors (strategic value, competitive bidding), which can skew averages. However, review both median and average - if they differ significantly, investigate outliers and consider excluding them if not relevant.
How do I account for transaction-specific factors?
Account for differences by: adjusting for growth differences, considering strategic vs. financial buyer premiums, accounting for synergies included in transaction price, adjusting for market timing differences, and considering transaction size differences. Precedent transactions with very different characteristics may need adjustment or exclusion.
Summary
This tool values a company using precedent transaction analysis by applying transaction multiples from past M&A deals, which include control premiums and synergies.
Outputs include estimated enterprise values from each multiple, average estimated EV, valuation range, interpretation, recommendations, an action plan, and supporting metrics.
Formula, steps, guide content, related tools, and FAQs ensure humans or AI assistants can interpret the methodology instantly.
Embed This Calculator
Add this calculator to your website or blog using the embed code below:
<div style="max-width: 600px; margin: 0 auto;">
<iframe
src="https://mycalculating.com/category/finance/precedent-transaction-valuation-calculator?embed=true"
width="100%"
height="600"
style="border:1px solid #ccc; border-radius:8px;"
loading="lazy"
title="Precedent Transaction Valuation Calculator Calculator by MyCalculating.com"
></iframe>
<p style="text-align:center; font-size:12px; margin-top:4px;">
<a href="https://mycalculating.com/category/finance/precedent-transaction-valuation-calculator" target="_blank" rel="noopener">
Use full version on <strong>MyCalculating.com</strong>
</a>
</p>
</div>
Value a company using precedent transaction analysis by applying transaction multiples from past M&A deals, which include control premiums and synergies.
How to use Precedent Transaction Valuation Calculator
Step-by-step guide to using the Precedent Transaction Valuation Calculator:
Enter your values. Input the required values in the calculator form
Calculate. The calculator will automatically compute and display your results
Review results. Review the calculated results and any additional information provided
Frequently asked questions
How do I use the Precedent Transaction Valuation Calculator?
Simply enter your values in the input fields and the calculator will automatically compute the results. The Precedent Transaction Valuation Calculator is designed to be user-friendly and provide instant calculations.
Is the Precedent Transaction Valuation Calculator free to use?
Yes, the Precedent Transaction Valuation Calculator is completely free to use. No registration or payment is required.
Can I use this calculator on mobile devices?
Yes, the Precedent Transaction Valuation Calculator is fully responsive and works perfectly on mobile phones, tablets, and desktop computers.
Are the results from Precedent Transaction Valuation Calculator accurate?
Yes, our calculators use standard formulas and are regularly tested for accuracy. However, results should be used for informational purposes and not as a substitute for professional advice.