Let’s say you have a company that owns 33% of a public subsidiary. The company consolidates everything (so it shows noncontrolling interest on the B/S and I/S). Is it possible to calculate the parent’s true EV/EBITDA, since the subsidiary is public? The EBITDA side seems pretty straightforward, just take consolidated EBITDA less total subsidiary EBITDA + parent’s share of sub’s EBITDA. The EV side is a little trickier. Market cap is easy. For Debt and Cash, just use the same logic as we did with the EBITDA calcs. But what about the Noncontrolling interest on the B/S? Do we exclude it entirely from the parent’s true EV? Do we keep (33% * Noncontrolling interest)? Do we keep the whole part of Noncontrolling interest?
I’m not sure if I understand your question, but it would be standard to include the full minority interest in the EV calcuation where EV = Market cap + debt + preferred + MI - cash. I find the phrasing of your question confusing – “the company consolidates everything.” The company would consolidate the portion of the non-controlling interest they own, not the entire interest (i.e., not the whole subsidiary), so it wouldn’t be “everything.” I’m not trying to nit pick your semantics, but it’s important to recognize that you wouldn’t take 33% * the non-controlling interest since that would be taking a fraction of a fraction, when you really want to use the entire non-controlling interest for your EV calculation. At least assuming I am understand what you wrote. Also, what do you mean “true” EV? There is only correct EV and incorrect EV based on the formula. Maybe I missed what you are trying to say. Also, are you suggesting that the parent is public as well? Where are you getting the market cap for the parent?
Yeah, both the parent and the sub are public. I’m pretty sure when the parent reports, it consolidates everything (parent + 100% of the sub) on the B/S and I/S. Typically you do not know the sub’s portion of line items on the I/S. So that’s why you add the minority interest to the EV side of the equation, so that both your EV and EBITDA reflect parent + 100% of the sub. So your EV/EBITDA ratio is for the whole consolidated entity (parent + 100% of the sub), right? I’m trying to calculate the EV/EBITDA for parent + 33% of the sub. This is what I mean by “true” EV/EBITDA.
If you are sure that the parent consolidates the subisidary then takes out below the line in I/S B/S thru minority interest, then the calculation is straight forward. Parent EBITDA = Total EBITDA - Sub EBITDA Parent EV = Total EV - Sub EV