Do you ALWAYS use the median multiple of a set of public company comparables or precedent transactions?

Do you ALWAYS use the median multiple of a set of public company comparables or precedent transactions?

• A. Yes, you must always use the median.
• B. There is no rule; you typically use the median but may use the 25th percentile if distressed or performing well.
• C. You must always use the 25th percentile.
• D. You must always use the 75th percentile.

Answer: (B)

When valuing with public comps or precedent transactions, you compare multiples like EV/EBITDA or EV/Sales across a peer group and summarize that spread to apply to the target. The usual starting point is the median because it represents a central, robust value that isn’t swayed by outliers. There isn’t a rigid rule that you must always use the median; you can tailor the choice to the situation. In cases where the target is distressed or otherwise not aligned with peers, a more conservative or situational choice—such as using the 25th percentile—may be appropriate. This approach acknowledges that the best multiple can depend on the specific risk, liquidity, or performance profile of the target, even though the median is the typical default.

When valuing with public comps or precedent transactions, you compare multiples like EV/EBITDA or EV/Sales across a peer group and summarize that spread to apply to the target. The usual starting point is the median because it represents a central, robust value that isn’t swayed by outliers. There isn’t a rigid rule that you must always use the median; you can tailor the choice to the situation. In cases where the target is distressed or otherwise not aligned with peers, a more conservative or situational choice—such as using the 25th percentile—may be appropriate. This approach acknowledges that the best multiple can depend on the specific risk, liquidity, or performance profile of the target, even though the median is the typical default.