From the outset of any potential transaction, it is important to make sure that all of the parties are speaking the same language as far as the specific type of value being considered—equity value, enterprise value or invested capital value. While the three are related, there are significant differences between them, and understanding those differences is a crucial component in reaching an appropriate transaction price.
In January 2018, the National Association of Certified Valuators and Analysts’ QuickRead online resource published an article that I authored, “Why All Values are Not Created Equal,” which originally ran in a 2015 edition of the Cleveland Metropolitan Bar Journal. In it, I highlight the differences in equity, enterprise and invested capital value that I often share with attorneys as additional tools to effectively navigate valuation-related disputes and negotiations.
You can read the article here.