Do not confuse equity price with enterprise value
Distinguish equity purchase price from enterprise value in a simple acquisition screen.
The move: ask, "What business value are we comparing?" In M&A, the headline price often describes the equity check. Enterprise value asks a different question: what is the value of the whole operating business after accounting for debt-like claims and cash? Equity value Equity value is what common shareholders receive. It is useful for understanding proceeds to owners and dilution when stock is used as consideration. Enterprise value Enterprise value adjusts for capital structure. A buyer effectively takes responsibility for debt and benefits from cash. That is why EV is the better numerator for operating multiples like EV/EBITDA. The common…
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