Equity Value vs. Enterprise Value

Enterprise Value vs Equity Value – This is one of the most common valuation topics that causes confusion in interpreting the BizEquity Valuation Report.

In most basic terms, Equity Value is the value only to the shareholders, however, Enterprise value is the value of the firm that accrues to both the shareholders and the debt holders (combined). What is Equity Value?

Equity Value is simply the Value of a firm’s equity i.e. the market Capitalization of the Firm.  This is relevant when selling “stock” (equity) or filing estate/gift tax returns or settling a divorce.

However, in many cases this is not the proper or relevant reflection of a company’s true value.  The “asset sale value” is the most important in terms of selling the typical owner-operated business and “enterprise value” is often the chosen perspective among investment bankers for middle-market companies.