NFP Investments

Why are NFP's investments treated differently and why would they be more scrutinized when compared to private companies ?#5. State Regulation (Student Post)

Публикация участника Abhishek Jain

Why do we subtract Investment in Associates when computing Enterprise Value? EV = MV of Equity + MV of Debt + MV of Preferred Stock – Cash + Minority Interest – Investment in Associates Investment in associates is basically a minority active stake in a company Now think of it from a multiple perspective Say EV/EBITDA Assume a 30% stake in an associate company The proportionate 30% income from the associate investment is only reflected in the Net Income of the consolidated entity (not in EBITDA) But in enterprise value computation, we have the Market value of Equity – which includes the market value of this 30% stake in the associate company Hence making the multiple inconsistent (numerator vs denominator) To avoid this, we remove this 30% equity investment from the EV And now the multiple is apples to apples| 16 комментариев в LinkedIn

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