Enterprise Value

In middle-market transactions, it is also helpful to distinguish between equity value and

enterprise value. Enterprise value is a reflection of the firm’s value as a functioning entity and it

is helpful in that it facilitates the comparison of companies with varying levels of debt.

The enterprise value can be calculated directly as a multiple of EBITDA, e.g. 5 times EBITDA.

In theory, enterprise value represents the value of the entire enterprise (not just the equity) or

the entire “capital structure” (debt plus equity).

In practice, it is equal to:

Enterprise Value:

Equity Value PLUS Long Term Debt LESS Cash