Series 79 practice questionmediumPrecedent Transaction Analysis
When selecting precedent transactions for analysis, why might distressed deals be excluded from a peer group?
- AThey distort calculation of control premiums
- BThey always result in higher premiums
- CThey are more recent than healthy transactions
- DThey may have materially different valuation dynamics✓ Correct answer
Explanation
Why D — They may have materially different valuation dynamics
Distressed transactions often involve lower multiples and unique drivers, making them unsuitable for most peer analyses. Including them could undervalue healthy targets.
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