forthisfirm.Figure10.7showshoweachinputinto
the multiple will be affected by the consolidation.FIGURE 10.7 Consolidated Holdings and EV/EBITDA
Multiple
As we noted in Chapter 9, analysts often try to fix the
inconsistencyproblembyaddingbackminorityinterest(the
accountant’s estimate of the value of the 40 percent of
company B that does not belong to company A) to the
numerator. The problem, however, is that they should be
addingback 40 percentofthemarketvalueofthesubsidiary
to the numerator if they want to construct a composite
enterprise value-to-EBITDA multiple. We can use the
techniquessuggestedinthepastsection,includingapplyinga
price-to-book multipleto theminorityinterest, to complete
thisestimation.Aswithequitymultiples,theproblemwillbe
findingcomparablefirmswiththesamemixofbusinesses.A
muchmoreeffectivewayofdealingwithmajorityholdings
would be to compute a pure parent company enterprise
value-to-EBITDAmultiple,describedinChapter9,wherewe
netoutthevalueofallholdings,minorityaswellasmajority,
from the enterprise value.