Flaws in public company comparables
- No company is 100% comparable to another company.
- The stock market is "emotional" - your multiples might be dramatically higher or lower on certain dates depending on the market's movements.
- Share prices for small companies with thinly-traded stocks may not reflect theirfull value.
Flaws in Precedent Transactions
- Past transactions are rarely 100% comparable - the transaction structure, size of the company, and market sentiment all have huge effects.
- Data on precedent transactions is generally more difficult to find than it is for public company comparables, especially for acquisitions of small private companies