Do you pay more for a company that leases its machinery or one that owns it?
I understand that leasing machinery lowers EBITDA and hence results in a higher EBITDA multiple, whereas with ownership, the charge is not reflected in EBITDA causing it to be higher and thus the multiple is lower. But in terms of the company's intrinsic value, doesn't owning the machinery as an asset actually increase its total value? And so would we disregard the valuation dependent on multiples and instead base it on future cash flows?
Multiple valuation depends on the multiple which you apply to capitalize lease expense as per IFRS 16 vs the multiple you use to value the business. But yes, there's generally a multiple impact one way or the other.
https://www2.deloitte.com/content/dam/Deloitte/nl/Documents/mergers-acq…
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