Enterprise Value

Enterprise value (EV) is the total value of a business, representing what a buyer pays to acquire the entire operating business — including its debt but excluding its cash. It is the most common basis for stating a business sale price in Canadian M&A transactions.

Enterprise value differs from equity value: equity value is what the shareholders receive, calculated by subtracting net debt (debt minus cash) from enterprise value. In small business transactions where the business is sold debt-free, enterprise value and equity value are often equivalent.

Enterprise value is calculated by multiplying a normalized earnings metric (EBITDA or SDE) by an industry-specific multiple, or by using a discounted cash flow analysis. The term enterprise value is used interchangeably with "business value" or "asking price" in many small business sale contexts.

See also: EBITDA, EBITDA Multiple, Equity Value, Business Valuation.