# Comparable transactions

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**Comparable transactions**, in the context of [mergers and acquisitions](/source/Mergers_and_acquisitions) (M&A), is one of the conventional methods to [value a company](/source/Company_valuation) for sale. The main approach of the method is to look at similar or comparable transactions where the acquisition target has a similar business model and similar client base to the company being evaluated. The value of a business is then arrived at using a similar multiple of the company's [EBITDA](/source/EBITDA) as demonstrated by multiples of EBITDA achieved in past, completed transactions of comparable businesses in the sector.[1][2]

See [valuation using multiples](/source/Valuation_using_multiples) more generally. This approach is fundamentally different from that of [DCF valuation method](/source/Valuation_using_discounted_cash_flows), which calculates [intrinsic value](/source/Intrinsic_value_(finance)).

## Example

In 2010, [Providence Equity Partners](/source/Providence_Equity_Partners) acquired Virtual Radiologic Corporation, which is an online clinic that provides radiologist analysis through a virtual network. It was sold for a price of million and an [enterprise Value](/source/Enterprise_Value) of $242 million.[3] To evaluate a similar unsold company, we would look at what are called the transaction multiples.

One popular transaction multiple is [EV/EBITDA](/source/EV/EBITDA). For Virtual Radiologic Corporation, the EBITDA at the time of the transaction was $20 million, giving an EBITDA multiple of 12.1x. A similar unsold company, which has EBITDA at $10 Million could expect to be sold for $120 million. In some market segments, the companies do not have high EBITDA, and sometimes a multiple based on revenues ([EV/sales](/source/EV/sales)) is used instead. To get a more accurate valuation, one should look at the multiples of more than one similar deals that are relatively recent since multiples do change from year to year.

## References

1. ["Comparable Company Analysis (CCA): How Is It Used in Investing?"](https://www.investopedia.com/terms/c/comparable-company-analysis-cca.asp). Investopedia. March 19, 2020.

1. ["Mergers Acquisitions - Glossary - Comparable Transaction Analysis"](http://www.mergers-acquisitions.org/glossary/term/167). mergers-acquisitions.org. [Archived](https://web.archive.org/web/20110727081052/http://www.mergers-acquisitions.org/glossary/term/167) July 27, 2011 at the Wayback Machine.

1. ["Virtual Radiologic announces its acquisition for $294 million"](https://www.diagnosticimaging.com/view/virtual-radiologic-announces-its-acquisition-294-million). Diagnostic Imaging. May 17, 2010.

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