Wall Street Prep Training Manual
Transaction
Comps Modeling
v W W W. W A L L S T R E E T P R E P. C O M
,Transaction Comps Modeling
Transaction comps overview
• “When you try to gauge
the fair value of your
house by comparing to the
values of houses nearby,
you’re doing a transaction
comps analysis.”
2
Licensed to Abhinav Dholepat. Email address:
,Transaction Comps Modeling
Transaction comps overview
• Comparing companies Most common transaction multiples are
is harder than houses • Transaction Value (TV)1 / Target EBITDA
because truly • TV / Target Revenue
• TV / Target EBIT
comparable companies • Offer price per share / Target EPS
are hard to find. • Offer value2 / Target net income
• Even if you find comparable transactions, you must standardize for
differences like size, so we use multiples.
• Multiples are derived from the recent consideration provided by
acquirers to purchase similar companies in the past.
1 Transaction value refers to enterprise value in M&A context
2 Offer value refers to equity value in M&A context
3
Licensed to Abhinav Dholepat. Email address:
, Transaction Comps Modeling
Methodology of transaction comps
1. Determine universe of comparable transactions(1)
2. Calculate multiples(2)
Offer price/EPS, Offer value/Book equity
TV/EBITDA, TV/EBIT, TV/Revenues
Industry-specific enterprise & equity multiples
3. Apply the calculated mean/median to target’s corresponding
operating metrics to arrive at a value
1 We will discuss how to screen for comparable transactions shortly.
2 Multiples calculated on an LTM basis. When available, multiples are also calculated on a 1 and 2-year post-acquisition forward basis (based on
pre-deal projections).
4
Licensed to Abhinav Dholepat. Email address:
Transaction
Comps Modeling
v W W W. W A L L S T R E E T P R E P. C O M
,Transaction Comps Modeling
Transaction comps overview
• “When you try to gauge
the fair value of your
house by comparing to the
values of houses nearby,
you’re doing a transaction
comps analysis.”
2
Licensed to Abhinav Dholepat. Email address:
,Transaction Comps Modeling
Transaction comps overview
• Comparing companies Most common transaction multiples are
is harder than houses • Transaction Value (TV)1 / Target EBITDA
because truly • TV / Target Revenue
• TV / Target EBIT
comparable companies • Offer price per share / Target EPS
are hard to find. • Offer value2 / Target net income
• Even if you find comparable transactions, you must standardize for
differences like size, so we use multiples.
• Multiples are derived from the recent consideration provided by
acquirers to purchase similar companies in the past.
1 Transaction value refers to enterprise value in M&A context
2 Offer value refers to equity value in M&A context
3
Licensed to Abhinav Dholepat. Email address:
, Transaction Comps Modeling
Methodology of transaction comps
1. Determine universe of comparable transactions(1)
2. Calculate multiples(2)
Offer price/EPS, Offer value/Book equity
TV/EBITDA, TV/EBIT, TV/Revenues
Industry-specific enterprise & equity multiples
3. Apply the calculated mean/median to target’s corresponding
operating metrics to arrive at a value
1 We will discuss how to screen for comparable transactions shortly.
2 Multiples calculated on an LTM basis. When available, multiples are also calculated on a 1 and 2-year post-acquisition forward basis (based on
pre-deal projections).
4
Licensed to Abhinav Dholepat. Email address:
