Why is only interest bearing debt included in EV? I understand that sometimes you include pension liabilities, capital leases, etc., but why aren't all liabilities included? Wouldn't these need to be paid off by an acquirer?
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Not fully sure, but my understanding is as follows:
Stuff like accounts payable and short-term debt is usually short-term vendor financing. Assuming you're buying the company, you wouldn't necessarily have to pay out these obligations if you intend to operate the business as usual.
Hope that helps - someone lmk if I'm wrong.
All parties that can make claim on a company's assets are included in EV.
Equity = regular share holders Debt = debt holders and creditors (who have rights to a company's assets in the case of default) Preferred Equity = preferred share holders
A party that you owe money to, for example an accounts payable liability, doesn't necessarily hold a claim on a company's assets. Sure the company may owe them money, but that person can't really come after the company and try to take a piece of it for themselves. Disclaimer: this is true most of the time; there may be special circumstances.
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