Valuation Fundamentals
The three core methods every banker uses.
Enterprise Value vs Equity Value
Equity Value is what shareholders own. Enterprise Value is the value of the whole operating business — what you'd pay to take over the entire company, regardless of how it's financed.
EV = Equity Value + Debt + Preferred + Minority Interest − Cash & Equivalents.
EV is capital-structure neutral. That's why EV/EBITDA is the workhorse multiple for comparing companies with different leverage.
Key Concepts
The Three Valuation Methods
Bankers triangulate value using three approaches: (1) Comparable Companies — public-market multiples of similar businesses, (2) Precedent Transactions — multiples paid in recent M&A deals (typically includes a control premium), (3) DCF — intrinsic value of projected free cash flows.
You display them as a football-field chart showing the valuation range from each method.
Key Concepts
Common Multiples and When to Use Them
EV/EBITDA: most common, works across capital structures. EV/Revenue: for unprofitable or pre-EBITDA companies (early-stage tech, biotech). P/E: equity multiple, used for banks/insurance where debt is operational. P/B: for financial institutions. EV/EBIT: when D&A differs materially across comps.
Key Concepts