Confused clients often ask: “Why did the valuation change? It’s the same company!” Here’s why: it’s not about the business—it’s about the deal structure.

A stock purchase is riskier for the buyer than an asset purchase with leverage. That means a higher required return—and a lower equity valuation.

Backed by Nobel-winning theory from Modigliani & Miller, this isn’t opinion—it’s finance 101. ⚖️ Enterprise value and equity value diverge when capital structure changes.

Takeaway for lenders: Always match the income stream and discount rate to the capital structure. Misalignment leads to misleading conclusions.

Check out our article and video on this topic!