How to build a comparable company analysis in private equity

Comparable company analysis — or "comps" — is one of the most fundamental tools in private equity deal evaluation. Done well, it gives you a market-derived valuation range grounded in actual transaction data. Done poorly, it gives you false precision and bad decisions.

Here is a practical, step-by-step approach to building a comparable company analysis that will hold up in an investment committee meeting.

1. Define the universe before you select peers

The most common mistake in building comps is starting with a list of companies you already know and working backwards. Instead, start with a clear definition of what you are looking for.

A good comparable company should share:

Start broad — identify 20 to 30 candidates — and then filter to the 8 to 12 most relevant.

2. Gather the right financial data

For public companies, you will need trailing twelve months (LTM) and next twelve months (NTM) data for:

For private company transactions — which are more relevant for Italian private markets — you typically have access to announced deal values and the target company's last reported financials. The implied multiple is calculated backwards from the deal value.

The LTM vs. NTM debate: For fast-growing businesses, buyers pay for the future, not the past. For stable or declining businesses, NTM estimates carry more uncertainty. Use both and explain the choice in your IC memo.

3. Calculate the key multiples

The three multiples you will use most in Italian private equity:

EV/EBITDA: The most widely used in M&A. Normalizes for capital structure differences between companies. Industry convention in Italy ranges from 6x for traditional SMEs to 15x+ for high-growth, recurring revenue businesses.

EV/Revenue: Useful for high-growth or pre-profitability businesses where EBITDA is not meaningful. Less common in traditional Italian SME transactions.

EV/EBIT: Similar to EV/EBITDA but accounts for depreciation and amortization. More relevant in capital-intensive industries.

Calculate the mean, median, 25th percentile and 75th percentile of your peer set for each multiple. The interquartile range (25th–75th) is often more useful than the full range, which can be skewed by outliers.

4. Apply the multiples to your target company

Once you have your comps range, apply the multiples to the target company's financials.

If the peer set trades at an LTM EV/EBITDA range of 7x to 10x, and your target has €8M of LTM EBITDA, the implied enterprise value range is €56M to €80M.

Now you need to make a judgment call: where in the range does your target belong, and why? This is where qualitative analysis matters:

Document your reasoning. The IC will ask.

5. Build the football field chart

A football field chart visualizes the output of multiple valuation methodologies on a single axis. Standard format:

Where the ranges overlap, that is the credible value zone. Where they diverge significantly, you need to explain why.

6. Validate against transaction comps

Public company multiples are a reference point, not the answer. For an M&A transaction, the more relevant comparison is precedent transactions — what did buyers actually pay for similar businesses in comparable deals?

In Italian private markets, finding transaction comps requires access to deal databases (Mergermarket, CapIQ, proprietary data) or building your own database of announced deals in your sector.

Key differences between public comps and transaction comps:

7. Common mistakes to avoid

Garbage in, garbage out: If your peer's financial data is wrong, your entire analysis is wrong. Always verify LTM figures against actual filings.

Ignoring capital structure: EV multiples are capital structure neutral; equity multiples are not. Use EV multiples for operational comparisons.

Over-relying on US comps: Italian private companies trade at a discount to US peers in most sectors. Using US multiples without adjustment will give you an inflated valuation that the seller will love and the IC will reject.

Not adjusting for non-recurring items: EBITDA adjustments — one-off costs, management normalizations, rent under new lease standards — can significantly change the multiple. Be explicit about what you are and are not including.

Using Blind Side for comparable analysis

Building a comparable company analysis manually takes a full day for a thorough analyst. Blind Side's valuation benchmarking module allows you to build and maintain comparable company sets, pull LTM financial data, calculate multiples automatically, and build the football field output — in about 20 minutes.

For Italian private markets specifically, we include private transaction data from Italian and European deals so you are not limited to public company comparisons.

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The goal of comparable company analysis is not to produce a number — it is to understand the range of plausible values and to develop a view on where your target should sit within that range, and why. The analysis is the discipline. The judgment is yours.