Which type of analysis is used to determine market value during a merger?

Comparable company and precedent transactions analysis is a vital tool used in determining market value during a merger. This approach involves assessing the market valuations of similar companies (comparable companies) and past merger transactions (precedent transactions). By analyzing these factors, financial analysts can gauge a reasonable market price for the company being evaluated based on how similar firms or deals have been valued in the past.

This method provides a practical benchmark by reflecting real-world market conditions and investor sentiment, which helps in establishing a fair value for the merging entities. It is crucial because it allows the acquiring company to base its offer price on empirical data rather than just estimates or theoretical models. Therefore, this technique is highly regarded in the context of mergers and acquisitions as it provides a more accurate and market-driven perspective on value.