Best way to calculate Equity for the purpose of multiples and EV?
Which of these two ways would you say is the better/more accurate way to calculate equity value of a company for the purpose of metrics (such as Equity/Net Inc and Equity/Book Value) and for calculating Enterprise Value.
[Weighted Average Shares Outstanding-Diluted] * [Share Price] (latest share price of the company before it was acquired)
Using Market Capitalization
I am doing my thesis on past acquisitions and am unsure which is better to calculate the equity value of a firm prior to the acquisition taking place.
Thank you for any help or guidance.
fully diluted share count times share price
Is weighted average shares outstanding diluted close enough to fully diluted share count, in your opinion? I do not have access to just the fully diluted share count, only the weighted average for diluted shares outstanding
fully diluted share count means shares outstanding + stock options +RSUs + any converts or warrants that are accretive etc. this is how it’s done in M&A
Neither - in a M&A transaction it will be based on the common shares outstanding, plus any dilutive securities that are in the money based on the per share acquisition price. Dilutive securities of the TargetCo may be exercised (paid out) if the consideration paid is cash, or may be swapped into options / warrants / etc of the BuyerCo if a share-based merger / acquisition.
I guess if there's a quick and dirty way to do it, diluted S/O * share price would be the more accurate way to approach it since it takes into account dilutive securities.
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