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.
| +118 | Is my life over after not getting GS? | 28 | 1h | |
| +70 | Best IB group on the Street | 32 | 10m | |
| +65 | Thoughts and tips on how to speak like an investment banker. | 25 | 16h | |
| +58 | BIG FOUR ARE PARADISE | 15 | 16h | |
| +48 | Tell me one good reason why Jefferies isn’t going to be a top bank in the next 5 years | 23 | 8h | |
| +36 | UBS Outlook | 28 | 1d | |
| +35 | How to deal with egotistical team? | 6 | 3d | |
| +33 | Highest Paid Bankers in Toronto? | 51 | 15h | |
| +29 | Are you “less ambitious” for having long term goals outside of NYC | 13 | 1h | |
| +28 | BEING WHITEGIRL IS PARADISE | 8 | 0 sec |
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)
Illo qui sint sapiente. Cum ipsam sequi autem eaque in maiores. Corrupti et cupiditate aliquid culpa. Officia deserunt neque sit harum delectus et expedita.
Deleniti debitis eum placeat quos dolores et. Eaque et quibusdam expedita quod eius nulla. Dolorem dolores ipsam velit. Est et quis aut nihil sit deleniti. Magnam dolorum veniam quia animi quam aut aut.
Ut sed est aut quae est. Quam et error quia sed sequi pariatur quia. Dolorum harum sunt facere molestiae. Natus voluptas sit nemo voluptate cum distinctio. Id dicta unde inventore laboriosam.
Nulla ex est quia culpa sequi. Exercitationem in omnis nihil dolores deserunt aut est. Quia voluptate ipsa aut.
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...