Series 79 practice questionhardPrecedent Transaction Analysis
A banker is reviewing precedent transaction multiples for a sector with recent distressed sales, LBOs, and strategic buyouts. What is the best approach to ensure a relevant valuation range?
- AExclude all strategic buyouts
- BUse only distressed transactions
- CSegment and relevance-weight the deals✓ Correct answer
- DTake a simple average of all available deals
Explanation
Why C — Segment and relevance-weight the deals
Segmenting and weighting transactions by relevance controls for different deal characteristics and market conditions. Simply averaging or excluding major categories risks producing distorted or incomplete benchmarks.
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