Nov 21, 2012

EBITDA Multiple Basic Question

If I know a company was acquired for 8x TTM EBITDA recently, does this mean that the company's equity was purchased for 8x TTM EBITDA, or does the 8x refer to the company's EV, from which I'd need to back out the debt and cash to arrive at the price paid for the equity?

Many thanks!

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9 Comments

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13y

On the face of it I'd assume 8x EV. The capital structure of basic equity doesn't really equate to EBITDA.

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See my other WSO blog posts>

esbanker

13y

an EBITDA multiple corresponds to a company's enterprise value

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Capitalist

Marginofsafety

13y

8x is the EV. back out the debt part of the capital structure to get to equity value.

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Authored by: Certified Private Equity Professional - 1st Year AssociateCertified Private Equity Pro

John10

13y

Yea, I agree with the guys that posted above. At the risk of beating a dead horse. If they had preffered shares, and pensions as well, these should also be taken off the EV to get to common equity value

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Be nice to those in distress, you could just as easily be in their shoes

Kenny_Powers_CFA

13y

Acquisition multiples should always be EV.

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There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.

mhurricane

13y

Multiply ebitda by 8, this gives you the implied enterprise value of the transaction. Net out debt (net), minority interest, etc to arrive at equity value. Lol, dead horse.

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The difference between successful people and others is largely a habit - a controlled habit of doing every task better, faster and more efficiently.

SonnyZH

13y

EV/EBITDA, hence you'd be referring back to the enterprise value.

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[quote]The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.[/quote]

ucmaroon47

13y

SonnyZHEV/EBITDA, hence you'd be referring back to the enterprise value.

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And so it goes

therealweinstein

13y

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EBITDA Multiple Basic Question

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