I was reviewing a deal for a minority investment in a private business and the owner is using the Enterprise Value (EV) as the basis to buy into the company.
Would it be more accurate to use the Equity Value (EV - net debt) to determine the valuation of the shares?
Example, two different scenarios (without the impact of share issuance):
1. $10m EV. If I invest $1m I would own 10% of the equity
2. $10m EV, $5M net debt = $5m equity value. If I invest $1M, I would own 20% of the equity.
Big difference.
What approach makes more sense and why?
Minority investment valuation: EV or Equity Value?

by a searcher from Concordia University
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