Case 025Comps and relative valueCore
You have one hour with 12 trading comps and 12 precedent transactions for a valve maker. Build a valuation range and say what you would present.
1The situation
Nandrik Flow Controls makes industrial valves and has EBITDA of Rs 80 crore. Its owners are considering a sale, and you are given a spreadsheet of 12 listed comparables and 12 precedent transactions, with one hour before you present.
Trading multiples range from 6.0x to 15.0x EV/EBITDA with a median of 9.5x; one company at 6.0x is in a covenant breach and one at 15.0x is a fast-growing automation specialist. Precedent multiples range from 8.0x to 16.0x with a median of 11.0x; the two highest, 15.2x and 16.0x, were contested auctions with three or more strategic bidders.
2Your task
How do you turn 24 numbers into a valuation range in an hour, what range do you present, and what do you say about it?
Quick check
Trading comps say 9.5x and precedents 11.0x. Why are precedents higher?
Worked solution
Try it on paper, then open one step at a time.
30-second answerThe answer to give first
Present Rs 678 crore to Rs 912 crore, with Rs 760 crore to Rs 860 crore as the centre. Use the middle half of each set after removing names that differ for a stated reason: the distressed and high-growth trading comps and the two bidding wars. That gives 8.5x to 10.6x on trading and 9.9x to 11.4x on precedents. Lead with precedents in a sale, because buyers pay for control.
Step 1How do you spend the hour?
Plan it before opening the file: ten minutes to read every name and note anything odd, twenty to clean and compute, fifteen to build the range and one chart, fifteen to rehearse what you will say. The interviewer is testing judgement about which numbers to trust, not arithmetic; almost all the value is in the first ten minutes of reading. It is like pricing a used car from 24 listings: you throw out the one with a damaged engine and the one sold at a collector's auction before you average anything.
Step 2Which numbers do you throw out, and why?
Only those that differ for a reason you can say in one sentence. The 6.0x trading comp is priced for a covenant breach, the 15.0x one for a growth profile Nandrik does not have, and the 15.2x and 16.0x deals were bidding wars whose prices reflect auction heat, not value. Keep everything else, even names you would not have picked, because removing data to reach a number is the error interviewers look for. Then use the interquartile rangeThe middle half of a set of numbers, from the 25th to the 75th percentile, which ignores the extremes at both ends. of what remains rather than the full spread: Nandrik at 6x to 16x is Rs 480 crore to Rs 1,280 crore, which tells a client nothing.
Step 3What range do you get?
On Rs 80 crore of EBITDA: trading comps give 8.47x to 10.60x, Rs 678 crore to Rs 848 crore; precedents without the bidding wars give 9.93x to 11.40x, Rs 794 crore to Rs 912 crore. Notice that removing the outliers barely moves the precedent median, from 11.0x to 10.75x. Medians are robust to outliers; ranges are not, which is why the cleaning matters most for the range you present.
| Method | Median | Middle half | EV, Rs crore |
|---|---|---|---|
| Trading comps, all 12 | 9.5x | ||
| Trading comps, without the two named | 8.47x to 10.60x | 678 to 848 | |
| Precedents, all 12 | 11.0x | ||
| Precedents, without bidding wars | 10.75x | 9.93x to 11.40x | 794 to 912 |
| Presented range | 678 to 912 |
Step 4What do you say when you present it?
Three sentences. First the range and what drives it: Rs 678 crore to Rs 912 crore, with precedents above trading because buyers pay for control. Second, what you removed and why, one clause each. Third, what would move Nandrik within the range: if it can show growth closer to the automation specialist, or attract more than one strategic bidder, it moves towards the top; if its order book is weak, towards the trading end. Close by saying the bidding wars show the price a contested auction can reach, which is an argument for running one, not a value.
Where candidates lose it
Candidates spend the hour computing averages of all 24 numbers and present 'about 10x, Rs 800 crore'. A single number from uncleaned data, with no reason for any exclusion, is exactly what the case is designed to expose.
The opposite error is cutting every name that disagrees with your instinct until the range is tight. Each removal needs a stated reason about the business, not about the multiple.
What the interviewer asks next
- How would you weight trading comps against precedents if Nandrik were raising minority capital instead of selling?
- Two precedents are from five years ago, when rates were lower. Do you keep them?
- How would a DCF fit alongside these two ranges in the presentation?
Asked at Harris Williams, Mergers and Acquisitions, Richmond, 2025 (Wall Street Oasis): Valuation case study: only had 1 hour to read through and analyze 12 comps and 12 transactions that I had to speak about
Company names and figures are illustrative.