Series 79 practice questionmediumPrecedent Transaction Analysis
When screening precedent transactions for valuation, which criterion is most likely to introduce selection bias if not properly considered?
- ASize of the target company
- BRegulatory approvals
- CInclusion of only successful transactions✓ Correct answer
- DCash vs. stock consideration
Explanation
Why C — Inclusion of only successful transactions
Including only successful deals creates survivorship bias, potentially overstating valuations and premiums. Ignoring failed or withdrawn deals may distort the representativeness of the sample.
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