What is the first step when conducting a comparison based on Precedent Transactions?

Initiating a comparison based on Precedent Transactions begins with selecting the universe of transactions. This step is crucial because it establishes a relevant set of similar transactions that are pertinent to the analysis. By identifying the appropriate transactions—those that are comparable in terms of industry, size, geography, and time frame—you create a solid foundation for subsequent steps in the analysis.

This selection allows analysts to ensure that the transactions are relevant benchmarks against which the target company's valuation can be assessed. Failing to accurately define this universe might lead to misleading conclusions based on irrelevant or dissimilar transactions. After identifying the appropriate transactions, further steps such as calculating key statistics or determining valuation can be executed with greater reliability, but the initial focus on selecting the right set of transactions is essential for the integrity of the entire comparison process.