Comparable transaction approach (merger and acquisition)

(Question)
To justify the use of the comparable transaction approach to establish a fair acquisition for Target company, one would like to conclude his report with the most important reason for choosing this approach. Which of the following rationals would one most likely use?

A. The fair acquisition price developed for Target reflects a market based valuation approach, an advantage compared to discounted cash flow valuations, which are based on assumptions that do not incorporate market valuations.
B. The acquisition prices for recently acquired companies provide a reasonable approximation of their realistic intrinsic values.
C. The fair acquisition price developed for Target is a realistic estimate of potential value to Acquirer given that forecasts of future performance are unavailable.

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Answer: A

This is a key reason to use the comparable value method, particularly when contrasted with the use of discounted cash flow valuations. Acquisition prices are not necessarily approximations of intrinsic values. A price developed based on comparable transactions does not always indicate the potential value of the acquisition to the purchaser.