Walk me through a precedent transactions analysis.

Say precedents value a company on prices paid for whole similar companies, so they include a control premium. Then give four steps: pick the deals, build each deal's enterprise value from the offer price, compute LTM multiples, and apply the median and range.

Updated October 20, 2026

The numbers, step by step

An invented target with $40 million of LTM EBITDA and $80 million of net debt. Past deals ran from 9 to 12 times LTM EBITDA, median 10.5 times.

Enterprise value at the median$40 × 10.5

$420 million

Low end of the range$40 × 9

$360 million

High end of the range$40 × 12

$480 million

Equity value at the median$420 − $80 of net debt

$340 million

What the interviewer listens for

• Do you say precedents include a control premium?
• Do you screen by business, size and time period?
• Do you build each deal's enterprise value from the offer price?
• Do you use LTM multiples at announcement and a median?
• Do you name the limits of the method?

Common mistakes

• Building the deal value from the target's share price before the offer instead of the offer price, which leaves out the premium.
• Mixing deals from very different credit markets without saying so.
• Putting strategic and sponsor deals in one list without noting that strategics can pay for synergies.
• Stopping at enterprise value and calling it equity value.Net debt still has to come off.

Likely follow-ups

• Why do precedents usually come out above trading comps?Each price bought control of a whole company, so it includes a premium and often part of the expected synergies. A share price is what a minority investor pays for a small stake.
• What is a premiums paid analysis?It looks at the percentage premium over the unaffected share price in similar public deals and applies the median to the target's own unaffected price.
• How do you handle a deal paid in the buyer's stock?Value the shares at the buyer's price at announcement to get the offer per share, then build enterprise value from it as usual.

More finance technicals

• How do you pick comparable companies?
• What is a football field chart, and how do you use it?
• The discount rate goes up by a point. What happens to the DCF, and which hurts more: that, or terminal growth falling by a point?
• What long-term growth rate would you pick for a DCF, and why not 6%?
• Do unfunded pensions or leases belong in enterprise value?

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