Focus Financial changes focus

After less than four years as a publicly traded company, Focus Financial Partners has found greener pastures. The firm is selling itself to private equity firm Clayton, Dubilier & Rice at a cash price of $53 per share. Therein the mystery lies.

When the two parties said earlier this month they were in talks, that per-share price represented a firm value of $4.1 billion. Now it represents an enterprise valuation of more than $7 billion.?

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EV refers to the entire market value of a company, not just its equity value. In corporate finance-speak, the formula is the value of common shares + preferred shares + market value of debt + noncontrolling Interest – cash and cash equivalents.

So what happened? Put simply, the $7 billion valuation includes, in large part, the hefty of amount of corporate debt Focus carries. The company has long-term debt of $2.5 billion, according to macrotrends. And it has nudged up its shareholder’s equity, or capital tied directly to its owners.

The per-share price is a big bump on the company’s recent average share price, which has struggled to gain traction over its four-year life.

We’ll have a lot more to say about this, but here’s what you need to know now:

Read more: Focus going private at valuation of $7 billion

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