Are multiples for acquisition comparables generally higher or lower than those for comparable companies?

Acquisition comparables tend to have higher multiples compared to those for comparable companies primarily because of the control premium that buyers are willing to pay when acquiring a company. When a business is sold, the acquirer often pays a premium over the current market price to gain control of the target company. This premium reflects the potential synergies, strategic advantages, and future growth opportunities that the acquiring firm anticipates achieving through the acquisition.

The market dynamics for acquisitions differ significantly from those governing trading companies. In public markets, stock prices are influenced by investor sentiment and can fluctuate widely without the element of control being significantly considered. On the other hand, in acquisition scenarios, the negotiation process typically involves considerations of control, which adds to the valuation.

Understanding this aspect is crucial for financial modeling and valuation, particularly when assessing potential acquisition targets and benchmarking their value against similarly positioned companies in the market.