Comparable Transactions
Valuation method that estimates a business's value by analyzing the prices paid for similar businesses in recent transactions. Also called the 'comparables method' or 'market approach'.
Definition
The comparable transactions approach means finding similar businesses (same sector, comparable size, similar market) that were sold recently, then using the multiples from those transactions to estimate the value of the business being valued.
In French-language Quebec documentation, you’ll see transactions comparables used for the same concept.
If three comparable manufacturing businesses were sold at multiples of 4x, 4.5x, and 5x EBITDA, you can estimate that your business’s value sits somewhere in that range.
Why comparables matter in a sale
Comparables are often the most convincing argument in a negotiation, because they’re based on real transactions, not theoretical models.
Data sources
- Private transaction databases (which brokers and valuators have access to)
- Sector reports on multiples
- Public transactions (for larger businesses)
Limitations
- Quebec SMEs are often sold privately — the data isn’t always available
- No business is perfectly comparable — adjustments are needed for differences in size, growth, profitability, and risk
- The market moves — comparables from 3 years ago don’t necessarily reflect the current market
What every seller should know
- Your broker has access to transaction databases that the public doesn’t — that’s part of their value add.
- Comparables are more useful as a reference range than as a precise number.
- Combining comparables with other methods (sector multiples, DCF) gives a more reliable picture of value.