Which statement is a pro of using precedent transactions?

Which statement is a pro of using precedent transactions?

• A. Multiples reflect actual payments
• B. Data based on past transactions that may not reflect current market conditions
• C. Rarely perfectly comparable
• D. Data is not publicly available

Answer: (A)

Using precedent transactions draws on the actual prices paid in past deals. The key strength here is that those multiples reflect real market behavior, including the control premium buyers were willing to pay and the specific deal dynamics that drove value at the time. That grounding in real transactions provides a practical benchmark for valuing a comparable target, making the multiples seem more credible and actionable than purely theoretical estimates. While past deals can be influenced by market conditions at the time and may not line up perfectly with current circumstances, and while data availability can vary, the central benefit remains: you’re looking at prices that were actually accepted in the market, which helps anchor valuation in reality.

Using precedent transactions draws on the actual prices paid in past deals. The key strength here is that those multiples reflect real market behavior, including the control premium buyers were willing to pay and the specific deal dynamics that drove value at the time. That grounding in real transactions provides a practical benchmark for valuing a comparable target, making the multiples seem more credible and actionable than purely theoretical estimates.

While past deals can be influenced by market conditions at the time and may not line up perfectly with current circumstances, and while data availability can vary, the central benefit remains: you’re looking at prices that were actually accepted in the market, which helps anchor valuation in reality.