Do companies pay for EV or Equity Value?
Hey everyone,
I was wondering if the deal ammounts reported are EV or equity value. I believed the acquirer only pays for Equity Value because he basically buy all shares of another company acquiring it. However, someone told me it's EV?!
What's behind the question: When I calculate transaction comps and I read deal volume/ company paid 100 million. Can I use the transaction figure for an EV/EBITDA multiple or Equity Value/net income?
Can someone please shed some light on this?
Thanks.
you use EV because you are acquiring "the company", not just the equity. Ex. if you acquire 100% of company A , if company A has 100 m of debt. you as the new owner will need to pay down that 100m in the future some time
ev/ebitda - transaction value paid will be the ev for that company
But what you pay is Equity
Thanks for your responses.
Glaxo acquired SmithKline in 2000. The transaction value is 76 billion USD. This is EV right?
https://secure.wikimedia.org/wikipedia/en/wiki/Mergers#2000s
It follows: Transaction value: EV? Price paid: Equity Value?
Given a target is private. How do I figure out net debt to calculate EV or Equity Value depending on what figure is given?
Thanks!
The deal is valued at ent. Value.. IE you may buy FDSO Equity, but you are acquiring a liability that has to be paid in the future, so you need to recognize you're eventually on the hook for more than just equity value, hence ent. Value..
almost always enterprise value but in some circumstances the debt can just roll over and thus you only pay equity value.
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