Comparable transactions, in the context of
mergers and acquisitions
Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspec ...
, is one of the conventional methods to value a company for sale. The main approach of the method is to look at similar or comparable transactions where the acquisition target has a similar business model and similar client base to the company being evaluated. The value of a business is then arrived at using a similar multiple of the company's
EBITDA
A company's earnings before interest, taxes, depreciation, and amortization (commonly abbreviated EBITDA, pronounced , , or ) is a measure of a company's profitability of the operating business only, thus before any effects of indebtedness, stat ...
as demonstrated by multiples of EBITDA achieved in past, completed transactions of comparable businesses in the sector. See
Valuation using multiples more generally.
This approach is fundamentally different from that of
DCF valuation method, which calculates
intrinsic value.
References
What is a Comparable Company AnalysisComparable Transaction Analysis
in the Glossary of mergers-acquisitions.org
{{DEFAULTSORT:Comparable Transactions
Mergers and acquisitions