Calculating an EV to LTM EBITDA Transaction Multiple

Summary

The document explains how to calculate the enterprise value to last twelve months EBITDA multiple for an acquisition when the reported enterprise value is available but EBITDA is not. The proposed method is to obtain the company’s income statement and cash flow statement, calculate EBITDA for the trailing twelve month period, and divide enterprise value by that figure.

The result expresses enterprise value as a multiple of the company’s EBITDA and is presented as a rough way to describe valuation relative to operating earnings. The exchange does not calculate the requested multiple for the specific acquisition, provide the company’s financial statements, or clarify how EBITDA should be adjusted for unusual items. EBITDA is only a proxy for cash flow, so the ratio is a valuation measure rather than a direct measure of cash generated or a definitive assessment of what a business is worth.

Key ideas

• Calculate EBITDA for the trailing twelve month period using company financial statements.
• Divide enterprise value by trailing EBITDA to obtain the EV/EBITDA multiple.
• The multiple describes enterprise value relative to EBITDA and can aid valuation comparisons.
• EBITDA is only a proxy for cash flow and does not itself establish a company’s fair value.

Tags

# Transaction multiple EV/LTM EBITDA


# Transaction multiple EV/LTM EBITDA












Envestnet acquired Yodlee in 2015. I need for this transaction the multiple EV (enterprise value) over last twelve months EBITDA. Can anybody help me with this? In the respective investor relations website they refer only to an amount of $590 million for the enterprise value at the announcement date, however no other info beside that.

Thank you in advance

## Answer by Lennart_R (score 1)

https://quant.stackexchange.com/a/37316

The multiple is EV/EBITDA.

1) use income statement and cash flow statement of the respective firm to calculate the EBITDA for the last twelve months - EBITDA is supposed to be a proxy for cash flow

2) divide the given Enterprise Value by your calculated EBITDA

3) you receive the EV/EBITDA multiple which tells you that firm x is (in theory) worth for example 7.1 times it's EBITDA with regard to enterprise value.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.