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FNCE90062
Studies in Finance
Department of Finance 1 What is Precedent Transactions Analysis Steps for Precedent Transactions Analysis Assignment Part I Table of Contents 1 What is Precedent Transactions Analysis 2 Steps for Precedent Transactions Analysis Overview Step I. Select the Universe of Comparable Acquisitions Step II. Locate the Necessary Deal-Related and Financial Information Step III. Key Statistics, Ratios, and Transaction Multiples Step IV: Benchmark the Comparable Acquisitions Step V: Determine Valuation 3 Assignment Part I Step 3 Step 4 Dr Zhen Shi FNCE90062 Capstone Studies in Finance Week 4 What is Precedent Transactions Analysis Steps for Precedent Transactions Analysis Assignment Part I Precedent Transactions Analysis Employs multiples-based approach to derive an implied valuation range for target Premised on multiples paid for comparable companies in prior transactions Selection of appropriate universe of comparable acquisitions is foundation for performing precedent transactions – Involves companies comparable to the target – Most recent transactions are most relevant Dr Zhen Shi FNCE90062 Capstone Studies in Finance Week 4 What is Precedent Transactions Analysis Steps for Precedent Transactions Analysis Assignment Part I Precedent Transactions Analysis Under normal market conditions, transaction comps (approach 3) tend to provide a higher multiple range than trading comps (approach 1) for two principal reasons – Buyers pay “control premium” – Strategic buyers: synergies Dr Zhen Shi FNCE90062 Capstone Studies in Finance Week 4 What is Precedent Transactions Analysis Steps for Precedent Transactions Analysis Assignment Part I Overview Step I. Select the Universe of Comparable Acquisitions Step II. Locate the Necessary Deal-Related and Financial Information Step III. Key Statistics, Ratios, and Transaction Multiples Step IV: Benchmark the Comparable Acquisitions Step V: Determine Valuation Table of Contents 1 What is Precedent Transactions Analysis 2 Steps for Precedent Transactions Analysis Overview Step I. Select the Universe of Comparable Acquisitions Step II. Locate the Necessary Deal-Related and Financial Information Step III. Key Statistics, Ratios, and Transaction Multiples Step IV: Benchmark the Comparable Acquisitions Step V: Determine Valuation 3 Assignment Part I Step 3 Step 4 Dr Zhen Shi FNCE90062 Capstone Studies in Finance Week 4 What is Precedent Transactions Analysis Steps for Precedent Transactions Analysis Assignment Part I Overview Step I. Select the Universe of Comparable Acquisitions Step II. Locate the Necessary Deal-Related and Financial Information Step III. Key Statistics, Ratios, and Transaction Multiples Step IV: Benchmark the Comparable Acquisitions Step V: Determine Valuation The Overview of the Precedent Transactions Analysis Step I. Select the Universe of Comparable Acquisitions Step II. Locate the Necessary Deal-Related and Financial Information Step III. Spread Key Statistics, Ratios, and Transaction Multiples Step IV. Benchmark the Comparable Acquisitions Step V. Determine Valuation Dr Zhen Shi FNCE90062 Capstone Studies in Finance Week 4 What is Precedent Transactions Analysis Steps for Precedent Transactions Analysis Assignment Part I Overview Step I. Select the Universe of Comparable Acquisitions Step II. Locate the Necessary Deal-Related and Financial Information Step III. Key Statistics, Ratios, and Transaction Multiples Step IV: Benchmark the Comparable Acquisitions Step V: Determine Valuation Step I: Select the Universe of Comparable Acquisitions Search M&A databases for comparable acquisitions – Requires a strong understanding of the target and its sector – Examines the M&A history – Review merger proxies Dr Zhen Shi FNCE90062 Capstone Studies in Finance Week 4 What is Precedent Transactions Analysis Steps for Precedent Transactions Analysis Assignment Part I Overview Step I. Select the Universe of Comparable Acquisitions Step II. Locate the Necessary Deal-Related and Financial Information Step III. Key Statistics, Ratios, and Transaction Multiples Step IV: Benchmark the Comparable Acquisitions Step V: Determine Valuation Step II. Locate the Necessary Deal-Related and Financial Information Dr Zhen Shi FNCE90062 Capstone Studies in Finance Week 4 What is Precedent Transactions Analysis Steps for Precedent Transactions Analysis Assignment Part I Overview Step I. Select the Universe of Comparable Acquisitions Step II. Locate the Necessary Deal-Related and Financial Information Step III. Key Statistics, Ratios, and Transaction Multiples Step IV: Benchmark the Comparable Acquisitions Step V: Determine Valuation Step III: Key Statistics, Ratios, and Transaction Multiples Key statistics, ratios and transaction multiples like in approach 1, except – Equity value * Offer price per share is multiplied by the target’s fully diluted shares outstanding at the given offer price – Based on the announced offer price per share * Purchase consideration – Refers to the mix of cash, stock, and/or other securities that the acquirer offers to the target’s shareholders Dr Zhen Shi FNCE90062 Capstone Studies in Finance Week 4 What is Precedent Transactions Analysis Steps for Precedent Transactions Analysis Assignment Part I Overview Step I. Select the Universe of Comparable Acquisitions Step II. Locate the Necessary Deal-Related and Financial Information Step III. Key Statistics, Ratios, and Transaction Multiples Step IV: Benchmark the Comparable Acquisitions Step V: Determine Valuation Step III: Calculation of Key Statistics, Ratios, and Transaction Multiples Purchase consideration – All-Cash Transaction – Acquirer makes an offer to purchase all or a portion of the target’s shares outstanding for cash Dr Zhen Shi FNCE90062 Capstone Studies in Finance Week 4 What is Precedent Transactions Analysis Steps for Precedent Transactions Analysis