Enterprise value

Enterprise value (EV, or valeur d'entreprise) represents the total economic value of a company to all its capital providers — equity holders and debtors — calculated as market capitalisation (or equity value) plus net financial debt. It is the standard metric for M&A transaction pricing and for applying valuation multiples (EV/EBITDA, EV/Revenue). The bridge from EV to equity value (the amount effectively paid to shareholders) requires subtracting net financial debt and any debt-like items, and adding cash and cash-like items — the cash-free/debt-free convention. Understanding this bridge is essential for correctly interpreting any M&A valuation.

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Example: a Swiss industrial company is valued at CHF 22.0 million EV (7x normalised EBITDA of CHF 3.1 million). Net financial debt at closing is CHF 4.5 million (bank loans CHF 6.0 million + IFRS 16 leases CHF 1.2 million - cash CHF 2.7 million). The equity value — what shareholders receive — is CHF 22.0 - 4.5 = CHF 17.5 million, a material difference from the headline EV that must be clearly communicated in every transaction.

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At Hectelion, the EV-to-equity-value bridge is systematically documented with precision in every transaction, as it directly conditions the net proceeds received by the seller.