Precedent Transactions

Precedent transactions value a company based on multiples from earlier comparable acquisitions. One looks at what prices were actually paid for similar companies. From this, it can be derived what the market is willing to pay for such a company. The methodological advantage is that these are prices actually agreed rather than model values. The control premium and buyers' synergy expectations are therefore automatically included. That also produces the most important limitation: because transaction multiples already contain control, they sit systematically above trading multiples and must not be increased by a further premium.

The practical difficulty is data. In the German mid-market purchase prices are regularly undisclosed, so the available databases are patchy and some entries rest on estimates. The underlying earnings figure is often unknown, leaving it open whether adjusted or reported EBITDA was used. Comparability is also limited, because transactions come from different market phases and credit availability and competitive intensity influenced the price.

In practice the comparison is therefore restricted to a manageable number of genuinely similar cases, adjusted for size, growth, margin and timing, and always presented alongside other methods. For the analysis, the enterprise value and the reference metric at the time of each comparable transaction are collected and turned into multiples, from which the median and the range between the first and third quartile are usually reported. Unlike multiples from listed comparables, these include a control premium, because the underlying cases involved a transfer of majority control.