medium · Investment Banking implied-share-price
ParentCo owns 80% of SubCo. SubCo generates $100 million of EBITDA.
Why is the full value of the noncontrolling interest (NCI) added in the Enterprise Value calculation?
- To ensure the numerator and denominator of the EV/EBITDA multiple are consistent.
- Because NCI represents a form of debt that must be repaid over time.
- To account for the fact that SubCo is a separate legal entity from its parent, ParentCo.
- To inflate the reported enterprise value in order to command a higher potential sale price.
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