Hey Guys, during my internship in the BIG 4 Transaction Services Area, I actually learned, that what we really pay for a company is its equity value. The whole amount you really then have to pay is the enterprise value. What does that mean exactly?
It seems like there is not a unique opinion on this and that it can be seen from several perspectives.
| +259 | Why UBS Is the Worst Place to Start Your IB Career | 40 | 1d |
| +216 | UBS 2nd Year Analyst Q&A (2026) | 41 | 3h |
| +93 | What's your craziest "hardo" story? | 16 | 12h |
| +62 | Indiana University Fraternity Pipelines | 36 | 2d |
| +52 | Rogo AI | 22 | 5h |
| +49 | Elite Boutique interview questions | 17 | 1d |
| +48 | Suspended for a Year | 19 | 2d |
| +47 | Wolf of Wall Street vs. Reality: Anyone else feel scammed by the movies? | 18 | 4h |
| +30 | Rate my non-target resume | 15 | 6h |
| +24 | RX Firm Lateral Advice | 15 | 10h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Think about it this way. When Company A buys Company B, it does so by tendering an offer to Company's B shareholders. To acquire company B, it will pay a certain share price (typically at a premium) x outstanding shares, so that it owns 100% of company B's shares. Thus what Company A pays to legally purchase Company B is the equity value. However enterprise value is often used for transaction value because in most cases, the acquiring company will assume the target company's debt. So while Company A is technically paying the equity value to acquire B, the enterprise value reflects the actual cost better because its the equity value plus the assumed debt, net of cash.
unless a change of control clause is invoked, in which case you have to pay off the debt (this is usually done during LBOs and then the financial sponsor will then take out debt again for the company, but this debt will reflect the change in risk and usually a greater leverage amount too)
Reiciendis sint laborum non nemo ut omnis quaerat. Dolorem incidunt voluptatem aliquam et aspernatur et repellat. Sapiente natus velit sint aut. Reiciendis totam consectetur sit asperiores vel iusto illum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...