What is the correct treatment of minority interest in Enterprise Value and valuation multiples?
A core Valuation interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
Minority interest represents the portion of a subsidiary's equity not owned by the parent. In Enterprise Value, we add minority interest because EV is the value of the entire consolidated firm, including the portion not owned. When calculating multiples like EV/EBITDA, the EBITDA includes the full subsidiary's EBITDA, so EV must include minority interest to be consistent. For equity value, minority interest is subtracted from EV along with net debt, as it represents a claim by other shareholders.
WHAT INTERVIEWERS LISTEN FOR
- ✓Minority interest is part of total enterprise value
- ✓Add to EV for consistency with consolidated EBITDA
- ✓Subtract from EV to get equity value (along with net debt)
COMMON MISTAKES
- ✗Ignoring minority interest in EV calculation
- ✗Subtracting minority interest from EBITDA
Reading isn't the same as answering under pressure.
Interviewers don't hand you the model answer — you deliver yours on a clock. Practice this and 1,000+ questions with AI feedback on every answer.
RELATED QUESTIONS
- Walk me through the Enterprise Value bridge.
- Why can't you use Equity Value / EBITDA?
- A company has $100m face value of in-the-money convertible bonds (conversion price $20, current share price $30). How should you treat the convertible in the enterprise-value bridge? Walk through the calculation.
- How do you incorporate a company's excess cash and non-operating assets into a valuation?
- A company has a market cap of $500M, total debt of $200M, cash of $50M, and 10 million shares outstanding. It also has 1 million in-the-money stock options with an exercise price of $20. The current stock price is $50. What is the diluted Enterprise Value?
- How do you treat an underfunded pension deficit in the EV-to-equity bridge, and what's the subtlety on tax?