How can you analyze comparable transactions in restructuring?

1 Selecting the comparables

The first step in a comparable transactions analysis is to select a set of relevant and representative transactions that can serve as benchmarks for the target company. You should look for transactions that have similar characteristics to the target company, such as size, industry, geography, business model, capital structure, and financial performance. You should also consider the timing and context of the transactions, such as the market conditions, the type and reason of restructuring, the level of distress, and the outcome of the deal. Ideally, you should select at least three to five comparable transactions that have occurred within the last two to three years, and that have sufficient and reliable data available.

2 Collecting and organizing the data

The next step is to collect and organize the data for each comparable transaction, as well as for the target company. You should gather information such as the transaction date, the parties involved, the deal structure, the enterprise value, the equity value, the debt amount, the interest rate, the maturity, the cash flow, the EBITDA, the revenue, and any other relevant metrics. You should also obtain the financial statements and filings of the comparable companies and the target company, and adjust them for any non-recurring items, accounting differences, or synergies. You should then organize the data in a spreadsheet or a table, and calculate the multiples and ratios for each comparable transaction, such as the EV/EBITDA, EV/Revenue, Equity/EBITDA, Debt/EBITDA, and Recovery Rate.

3 Comparing and adjusting the multiples and ratios

The third step is to compare and adjust the multiples and ratios of the comparable transactions to estimate the value of the target company. You should start by calculating the average and median values of each multiple and ratio across the comparable transactions, and use them as a reference point. You should then adjust them for any differences or discrepancies between the comparable transactions and the target company, such as growth rate, profitability, leverage, risk, and quality. You should also consider the impact of any specific factors or assumptions that may affect the value of the target company, such as the restructuring plan, the creditor claims, the valuation date, and the market sentiment. You should then apply the adjusted multiples and ratios to the target company's financial metrics, and derive a range of values for its enterprise value, equity value, debt value, and recovery rate.

4 Interpreting and presenting the results

The final step is to interpret and present the results of the comparable transactions analysis in a clear and concise manner. You should summarize the key findings and insights from the analysis, such as the implied value of the target company, the implied recovery rate for its creditors, the implied return for its investors, and the implied valuation multiples and ratios for its peers. You should also highlight the strengths and limitations of the analysis, such as the availability and quality of data, the selection and adjustment of comparables, the sensitivity and robustness of assumptions, and the comparability and relevance of transactions. You should then present the results in a format that is easy to understand and communicate, such as a table, a chart, a report, or a presentation.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?