An analyst notices that one comparable company trades at an EV/EBITDA multiple significantly above its peers. Upon investigation, the analyst discovers the company recently received a takeover bid. How should the analyst handle this situation?

AInclude the company at its current trading multiple to reflect market conditions
BExclude the company or note it separately, as its multiple reflects a control premium rather than intrinsic trading value✓ Correct answer
CAverage the company's pre-bid and post-bid multiples
DReplace the company with a non-public comparable

Explanation

Why B — Exclude the company or note it separately, as its multiple reflects a control premium rather than intrinsic trading value

When a comparable company's stock price has been inflated by a takeover bid, its trading multiple no longer reflects the market's view of standalone intrinsic value. Including it would bias the comps analysis upward. The standard practice is to either exclude the company from the peer set or present it separately with a footnote explaining the control premium embedded in its trading price. This maintains the integrity of the comparable company analysis as a measure of standalone trading value.

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