The Daily Technical #100: Describe a recent M&A deal.

Good morning. Welcome to the 100th edition of The Daily Technical.

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We started this newsletter to help you answer “walk me through a recent deal” in interviews. It’s a weekly email that analyzes recent transactions using first principles thinking.

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OVERVIEW OF YESTERDAY’S QUESTION
Which multiples are the most popular in valuation?

Enterprise Value/EBITDA multiples are the most common, followed by EV/EBIT and P/E.

There are several others that are more industry and company-specific. P/B ratios are used to value financial institutions, EV/Revenue multiples are used to value unprofitable companies, and (EV – Capex)/EBITDA multiples can be used for capital-intensive industries such as manufacturing or cable companies.

Common Mistakes

1. Failing to emphasize the hierarchy of multiples. Always begin with the most prevalent multiples, like Enterprise Value/EBITDA, to establish a strong base before exploring specific examples.

2. Not mentioning how certain multiples apply specifically to industries. Remember, precise context elevates your response—like using P/B for financial institutions or EV/Revenue for startups. Tailor your multiple choice to industry relevance for clarity.

TL;DR

• Prioritize Enterprise Value/EBITDA as the top valuation multiple.

• Follow with EV/EBIT and P/E as other key multiples.

• Use P/B ratios primarily for financial institutions.

• Apply EV/Revenue multiple for valuing unprofitable companies.

• Choose (EV – Capex)/EBITDA for capital-intensive industries like manufacturing.

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TODAY’S QUESTION
Describe a recent M&A deal.

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