Valuation terms

Enterprise value measures the operating business before financial debt and cash are taken into account. Under the multiples method, it may be calculated by applying an appropriate multiple to adjusted EBITDA.

Deducting Net Debt from enterprise value gives Equity Value. That calculated equity value is not necessarily the amount a seller later receives; the negotiated transaction terms also matter.

Example

Adjusted EBITDA of EUR 1.2 million at a multiple of 5.5x gives enterprise value of EUR 6.6 million. Deducting net debt of EUR 1.1 million gives equity value of EUR 5.5 million.