Valuation - Precedent Transactions (M&A Transaction Comps)
Valuing a company using Precedent Transactions or M&A Transaction Comps is a common way to determine the market valuation for a business. This method looks at the values of businesses that have been sold relative to their financial metrics (Revenue and EBITDA) and comes up with revenue multiples and EBITDA multiples that can then be applied to the business you are trying to do a valuation of. These multiples are commonly referred to as TEV/Revenue, EV/Revenue, Enterprise Value / Revenue or TEV/EBITDA, EV/EBITDA and Enterprise Value / EBITDA.
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