Enterprise vs. equity value, multiples, and how to triangulate what a company is worth.
There is no single "right" value for a company. Bankers run three or four methods, each answering a different question, and present a range. Here's the toolkit, why the methods disagree, and how the football field ties them together.
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Enterprise value is what the operating business is worth; equity value is what the shareholders own. The bridge between them, and why cash is subtracted rather than added, is the single most-tested relationship in valuation.
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EV multiples pair with pre-interest metrics, equity multiples pair with post-interest ones. Get the pairing right and you understand valuation.
Comparable companies analysis values a business off what the market is paying for similar public companies right now. How to pick the set, which multiples to use, and why EV/EBITDA is the workhorse.
Precedent transactions value a company off what acquirers actually paid for similar businesses in past M&A deals. The control premium, why they run high, and how they differ from trading comps.
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