Series 79 practice questionmediumPrecedent Transaction Analysis
How can the mix of cash versus stock in deal consideration affect the valuation multiple observed in a precedent transaction?
- AIt has no impact on valuation multiples
- BStock deals always command lower premiums
- CStock deals can show higher multiples when buyer shares are overvalued✓ Correct answer
- DCash deals always result in higher multiples
Explanation
Why C — Stock deals can show higher multiples when buyer shares are overvalued
If an acquirer's stock is highly valued, using it as currency can inflate multiples. Ignoring consideration mix can lead to misinterpretation of transaction values.
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