How reliable is your comparable transaction set?
A coverage score for valuation work that depends on comparable deals. Useful when synthetic comps are starting to show up.
When a banker presents a comparable transactions analysis, the question to ask is not "what is the median multiple." The question to ask is "how reliable are these comps." A small set of unverifiable or synthetic comps can produce any number you want.
The comp confidence checker runs a simple coverage score. For each comp in the set, you answer four questions: was the price publicly disclosed, did the deal close in the past three years, is the industry classification verifiable, is the comp real or synthetic. Each yes scores one point. A 100% coverage score means every comp in the set is real, recent, publicly priced, and clearly comparable.
When this matters
When you are about to rely on a comparable transactions analysis to make a real decision. Buying or selling a company, setting a fairness opinion benchmark, justifying a board recommendation. Run the comps through the tool. If the coverage score is below 75%, the underlying analysis is leaning on inferred or thin data, and the methodology should be disclosed prominently in any output that depends on it.
This connects to a broader trend covered in the synthetic comparables essay. AI-generated comp sets are a real product now. They have a place. They also have disclosure implications that most valuation work has not yet caught up with.
What the tool will not do
It will not tell you whether the underlying comps are well chosen. A comp can be real, recent, publicly priced, and clearly comparable, and still be a poor fit for the target. That judgment requires industry knowledge the tool does not have. The tool is for the verifiability layer; the comparability layer is human work.
Walter Allison is a corporate attorney in Denver. He writes here about M&A, private equity, and venture capital structure.
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