By Bill Anderson, FCCA, Chief Executive Officer, Assetica — 2026-07-29
A deal is agreed on enterprise value, the total value of the business, but what lands in your account is equity value, enterprise value minus net debt and other claims ahead of the shareholder. Confusing the two is the single most common reason sellers are disappointed at completion. The formula, a worked example, which multiples use which value, and how the bridge works differently in the UAE, the UK, Europe, Saudi Arabia and Australia.
Enterprise value is what it would cost to buy the whole operating business debt-free and cash-free, independent of how it happens to be financed. It is the figure EV/EBITDA and EV/Revenue multiples price, and it is almost always the headline number quoted in a term sheet or a press release about a deal.
Equity value is what is left for the ordinary shareholders once every lender, minority interest and preferred claim is settled. For a listed company it is market capitalisation; for a private UAE or UK business it is the figure a certified valuation report certifies, and it is the number that matters for a Golden Visa threshold, a shareholder buyout or a sale.
Equity Value equals Enterprise Value minus total debt and debt-like items, minus minority interests and preferred equity, plus cash and cash equivalents genuinely surplus to the business. Debt-like items go beyond bank loans to include IFRS 16 lease liabilities, deferred consideration, unfunded end-of-service gratuity provisions and overdue supplier balances.
EV/EBITDA and EV/Revenue price enterprise value, because EBITDA and revenue are unaffected by capital structure. Price/Earnings, dividend yield and Price/Book price equity value, because profit and dividends are calculated after financing costs. Applying an enterprise-value multiple directly to equity value, or vice versa, misstates the answer by the amount of net debt.
Most M&A term sheets quote enterprise value on a debt-free, cash-free basis: the seller separately clears the debt and keeps the cash at completion. A working capital target, or peg, is agreed in advance, and the price adjusts for any shortfall or surplus against it, which is where most post-completion disputes actually arise.
What is the simplest way to remember the difference between enterprise value and equity value?
Enterprise value is the value of the business as a whole, including the claims of lenders and other stakeholders. Equity value is what is left over for the shareholders once those claims are settled. Enterprise value answers what the operation costs to buy; equity value answers what the shareholder actually receives.
Is enterprise value always higher than equity value?
Not always. If a company holds more cash than debt, its net debt is negative and equity value can exceed enterprise value, which is common for cash-rich technology and professional services businesses with little or no borrowing.
Which figure does a UAE Golden Visa business valuation use?
Equity value, specifically the value attributable to the applicant's own shareholding net of debt, must meet the AED 2 million threshold. A report stating only the company's enterprise value will not satisfy the GDRFA or ICP.
What counts as a debt-like item beyond bank loans?
Finance lease liabilities under IFRS 16, deferred and contingent consideration from a prior acquisition, unfunded end-of-service gratuity provisions, shareholder loans, overdue supplier balances beyond normal terms, and pension or gratuity deficits are all commonly treated as debt-like when bridging to equity value.
How does working capital affect the equity value a seller receives?
Buyers agree a working capital target, or peg, representing a normal operating level of stock, receivables and payables. If working capital delivered at completion is below that peg the price is reduced; if above, the price increases. This adjustment sits inside the enterprise-to-equity bridge alongside net debt.
Can I calculate my own enterprise-to-equity bridge, or do I need a professional valuation?
For internal planning a rough calculation from your latest balance sheet is a reasonable start. For a transaction, a Golden Visa application or a shareholder buyout, you need an independent valuation that documents the methodology and itemises every adjustment, because a self-prepared figure carries no evidential weight.