Per Investopedia (http://www.investopedia.com/terms/e/ev-ebitda.asp):

Enterprise Value = (market capitalization) + (value of debt) + (minority interest) + (preferred shares) - (cash and cash equivalents)

I understand why debt and preferred shares would be counted in EV (and cash/cash equivalents counted against it) since EV represents a theoretical takeover cost.

However, I don't understand why minority interest would be added to EV. The value of such shares would already be included in market capitalization.


US accounting rules require companies that own more than 50% of subsidiaries to consolidate those subsidiaries onto their own books. But if it's more than 50% but not a wholly-owned subsidiary, then there's an entry on the parent company balance sheet for the value of the subsidiary not controlled by the parent (the Minority Interest) to adjust for that less-than-full ownership of the subsidiary.

In other words, it's not already incorporated into Market Cap because it's not part of the parent company's equity (ditto for debt). There's a useful and more detailed explanation here.

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