Which valuation method typically gives the highest value?
A core Valuation interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
There's no universal answer. Precedent Transactions often give the highest because they include a control premium (20–40%). But a DCF with aggressive assumptions can exceed anything. LBO typically gives the lowest (floor valuation). The order depends on market conditions, growth assumptions, and the specific deal.
WHAT INTERVIEWERS LISTEN FOR
- ✓Precedent Transactions include control premium
- ✓DCF can exceed with aggressive assumptions
- ✓LBO typically gives lowest valuation
- ✓No universal answer, depends on context
COMMON MISTAKES
- ✗Claiming one method always highest
- ✗Ignoring control premium in Precedent Transactions
- ✗Confusing LBO with highest valuation
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