What is Enterprise Value to EBITDA Multiple?
The EV/EBITDA multiple compares a company’s enterprise value (market cap plus debt minus cash) to its earnings before interest, taxes, depreciation and amortization. It is a capital-structure-neutral way to value businesses, especially when comparing companies with different debt levels or tax regimes.
How It Works
- Calculate enterprise value: market cap + total debt + minority interest + preferred equity – cash.
- Pull EBITDA from the income statement (or trailing twelve months).
- Divide enterprise value by EBITDA.
- Compare the result against peers and historical ranges.
Saudi Context
Saudi M&A advisors quote EV/EBITDA multiples when pricing acquisitions of family-owned businesses moving toward Tadawul listings, since it removes distortions from heavy or light leverage.
Example
A company with enterprise value of SAR 500 million and EBITDA of SAR 50 million trades at an EV/EBITDA multiple of 10x.