Valuation Multiple - Part 2
Trading Comps:-
Trading Comps or Analysis of Selected Publicly Traded Companies are multiples comparisons with other similar or comparable?companies. This method utilizes benchmark multiples based on publicly traded companies. The multiples derived from this?analysis are at a given point in time and generally change over time. It is important to note that trading multiples do not reflect?control premiums or potential synergies from a buyer.?
The following steps and methodologies would be applied in a “comps” analysis, in addition to the process described in the?multiples approach:?
It is not enough to simply use the same multiple as another publicly traded company. In most, if not all cases, the multiples that? the “comps” universe is trading at must be subjectively adjusted for factors including, but not limited to:?
A major disadvantage of this valuation method is that often, it is difficult to determine “the right comp”. Multiples are sensitive?to the following qualitative factors when comparing similar companies:?
Operations?
– Relative competitive position?
– Industry?
– Products?
– Markets?
– Distribution channels?
– Customer base?
– Seasonality?
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– Cyclicality
Financial Aspects?
– Size?
– Leverage?
– Margins & Profitability?
– Growth prospects?
– Shareholder base?
– Market conditions?
– Consideration paid?
– Surrounding circumstances
Deal Comps
Deal Comps or Analysis of Selected Acquisitions are very similar to trading comps except deal comps utilize actual transactions instead of publicly traded companies as the universe of comparable companies. All else being equal, deal comp multiples can be higher than trading comp multiples due to control premiums (premiums paid for a controlling stake in a company) and/or?potential synergies, such as cost savings and revenue synergies resulting from a combination of the two entities. They can also?be lower due to a lack of liquidity and smaller size, etc.
Deal comps are highly subjective in nature due to numerous factors:?
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1 年How would you value unlisted entities Aashutosh? Your thoughts :)