Hi all
I'm trying to value a company that has a 12% highly liquid publicly traded stake in another company. For all intents and purposes, this should be treated like cash, no?
If so, then it seems a little counterintuitive that this is netted off from debt to determine enterprise value...
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You net cash off against debt as well. What's confusing?
Well, I understand it if the acquirer wants to just immediately dispose of the stake. Then it's kind of like a "free rebate" that reduces the purchase price.
But if the acquirer wants to keep the stake? Shouldn't it NOT be netted off in this case?
the purpose of valuing a company is generally to arrive at the value from operation ... investments are non-operating asset, so it should be treated like a non-operating asset .. determine a value the operations (DCF, multiples etc.), then if necessary add the value of non operating assets to arrive at a fully loaded BEV...
if someone where to buy this company, assuming industry standard is 6x EBITDA, they would pay 6x for the operating business (including normalized WC) plus whatever other non-operating assets assumed.
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