Equity value is a market-based measure of the equity value of a firm. It accounts for all the ownership interest in a firm including the value of unexercised stock options and securities convertible to equity.
Equity value differs from market capitalization in that it incorporates all equity interests in a firm whereas market capitalization only reflects those common shares currently outstanding. It also reflects any outstanding debt whereas the market capitalization is a grossed up value including all debt outstanding. In the private equity and mezzanine debt world, equity value is usually measured as a multiple of the company’s EBITDA.

As the Fed decides to ease interest rates, middle market acquisition financing structures will benefit in a number of ways. The underlying values of middle market companies will increase leading to a higher enterprise value and lower loan to value ratios for existing portfolio companies of acquisition financing lenders.

The role of acquisition financing is infrequently elevated above a functional transactional one. When a business needs financing to acquire, they go to the market and source acquisition financing to supplement their equity investment to close the deal. Despite existing in many different forms, acquisition financing is rarely explained in terms of the value it brings to the acquirer.

Acquisition financing underwriting usually focuses on business and financial issues that underpin the stability of cash flow. Providers of acquisition financing usually validate the durability of a company’s competitive advantage and the depth of its resource base. Environmental issues are usually not a major part of the analysis in today’s service and technology-based economy.

Equity Value

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