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Enterprise Value
Enterprise value is what the operating business is worth, before debt and cash. Multiples attach to this figure.
EV answers one question: what is the business itself worth? Capital structure and tax sit outside it. First-round talks are usually held on EV. It is not a line on the balance sheet; it is EBITDA times the multiple, or equity value plus net debt. The walk from EV to Equity Value is Net Debt: equity value = EV minus net debt. Indicative offers are usually struck on EV. Cash in the seller's account is the equity value.
Example
Adjusted EBITDA of 1.2 million euros at a multiple of 5.5x gives an enterprise value of 6.6 million euros. With net debt of 1.1 million euros, equity value comes to 5.5 million euros.
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