M&A Foundations · glossary
Enterprise value is what the whole business is worth, ignoring how it is financed. Equity value is what the shares are worth: enterprise value less debt, plus cash. That bridge is how a headline valuation becomes the price in the SPA. Chapter 8
Explained in Chapter 8, Valuation: How Businesses Are Priced, of M&A Foundations.
Enterprise value (EV) is the value of the operating business itself — the machine that serves customers and generates cash — regardless of how it happens to be financed. Equity value is what the shareholders actually receive for their shares. The two differ because businesses carry debt and hold cash. Think of a house worth €500,000 with a €200,000 mortgage: the house (the “enterprise”) is worth €500,000, but the seller walks away with €300,000. The mortgage doesn’t change…Read Chapter 8, Valuation: How Businesses Are Priced →
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