Enterprise Value
The total value of a business including equity and debt, minus cash — used in M&A and valuation multiples.
Enterprise Value (EV) represents the theoretical takeover price of a company. It's calculated as market capitalisation plus total debt, minority interest, and preferred shares, minus cash and cash equivalents.
EV is preferred over market cap for valuation purposes because it's capital-structure neutral — it represents the value of the operating business regardless of how it's financed. Two companies with identical operations but different debt levels will have the same EV but different market caps.
The most common valuation metric using EV is EV/EBITDA, which shows how many times operating earnings a company is valued at. Typical multiples vary by industry: SaaS companies often trade at 15-30x EBITDA, while manufacturing companies might trade at 6-10x.
In M&A, enterprise value is the starting point for deal pricing. The buyer acquires the EV (paying equity holders and assuming debt), then adjusts for working capital, transaction costs, and any specific deal terms.
Related Terms
Earnings Before Interest, Taxes, Depreciation, and Amortization — a measure of operating profitability.
A valuation method that estimates the present value of a business based on its projected future cash flows.
The blended cost of a company's debt and equity financing, used as the discount rate in valuations.
Further Reading
A founder and CFO guide to financial due diligence — what sophisticated investors examine, common red flags, and how to prepare your business.
Wondering how much your Malaysian startup is worth? Learn how investors value startups, what drives your valuation up or down, and how to negotiate confidently.