Series 79 practice questioneasyPrecedent Transactions - Transaction Multiples
When using precedent transactions as a valuation method, what is the primary reason transaction multiples are typically higher than trading multiples?
- ABuyers pay a control premium✓ Correct answer
- BCompanies have more assets after the deal
- CMarket volatility is lower for transactions
- DSellers include more detailed financials
Explanation
Why A — Buyers pay a control premium
Transaction multiples are higher primarily due to the control premium that buyers pay to acquire a controlling stake. The other options are not correct: assets, volatility, and financial detail do not explain the premium.
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