Why strip out investment in associates?
This question is a duplicate of:
Do we strip out investments in associates from EV if they are part of core operations? 6 comments
Do we strip out investments in associates from EV if they are part of core operations? 6 comments
If a company has significant investment in associate (income from associates ~40% of revenue) that is related to the company’s core business, how to calculate EV/EBITDA? Why should we strip this out in our calculation?
associates are not included in EBITDA, therefore removed from EV to make the multiple apples to apples
What if my company's investments in associates is very core and central to my business? (e.g. my profits from associates ~40% of my company)
It doesn't matter if the associates' business is related to the company's core business. If they are associates it means the company doesn't have control over their earnings/cash flows. So they would be excluded from the EV. The equity value would take into account those investments in associates.
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