Precedent transaction analysis

Precedent transaction analysis values a company using the multiples actually paid in past acquisitions of similar firms, which embed a control premium above where the target traded before the deal.

ByHoang TruongUpdated July 11, 2026

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Three recent acquisitions of comparable companies were done at EV/EBITDA multiples of 7x, 8x and 9x, averaging 8x. Applied to a target with €25,000,000 of EBITDA, that gives an implied enterprise value of 8 × €25,000,000 = €200,000,000. Subtracting €40,000,000 of net debt leaves an implied equity value of €160,000,000.

Where it fits

SubjectCorporate FinanceAdvancedTopicBusiness Valuation & DCFAdvanced

The formula

LaTeX

V_E = (\overline{M} \times EBITDA) - ND

Variables

$V_{E}$: Implied equity value (€)
$\overline{M}$: Average precedent EV/EBITDA multiple (×)
$E B I T D A$: Target company's EBITDA (€)
$N D$: Target company's net debt (€)

Applies the average multiple observed in comparable past acquisitions to the target's own EBITDA, then converts the resulting enterprise value into an equity value.

Check yourself

PracticeCORE

Three recent acquisitions of comparable companies were completed at EV/EBITDA multiples of 6x, 7x, and 8x. Using the average of these precedent multiples, applied to a target company with EBITDA of €18,000,000 and net debt of €26,000,000, what is the target's implied equity value?

Select an answer to check your understanding.