Let’s say we’re valuing a private company. Why might we discount the public company comparable multiples but not the precedent transaction multiples?

There’s no discount because with precedent transactions, you’re acquiring the entire company – and once it’s acquired, the shares immediately become illiquid.

But shares – the ability to buy individual “pieces” of a company rather than the whole thing – can be either liquid (if it’s public) or illiquid (if it’s private).

Since shares of public companies are always more liquid, you would discount public company comparable multiples to account for this.