Enterprise Value; straight to the dome
Sup guys/gals? Hoping a few of you seasoned users could help clear up a few questions I have. Giving a small briefing on these and want to make sure I have them nailed down. Input is greatly appreciated.
As far as my understanding goes, MVIC and BEV are used interchangeably, but technically speaking there is a difference.
Here's what I'm working with:
Debt/Equity
+Any other long-term operating liab. (off balance sheet items)
=MVIC
-Non-op assets
+Non-op Liab.
+Non-controlling interest
=BEV
My first question is:
- When talking about an acquisition price, is this the MVIC we’re looking for? I have heard and read conflicting things on this topic.
currently reading another thread on here that states BEV is the acquisition price under all curcumstances. This is what I thought as well until someone told me differently recently.
I guess my hang up with this is the non-operating asset piece of this equation. Cash for example, would effectively reduce the acq. price by the amount, so technically speaking, removing this non-op asset (excess cash) would take the level of value to BEV. The reason I assumed MVIC might be the acq. price is that an acquiring firm doesn’t necessarily inherently have the power to negotiate non-op assets out of the deal.
- Second question is in regard to the non-op liab., not 100% on the technicalities of this adjustment that’s made to arrive at BEV.
I realize these questions may be pretty granular to some, just want to make sure I’m covering the bases.
There's a Damodaran thread on here that provides some pretty good color on the cash adjustment, especially for trapped cash, can't post the link though.
Thanks in advance.
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