Module II· Multiples & Sector SpecificsIntermediate
Question
What is EV/EBITDAR and when do you use it?
Answer
Mechanics
EV/EBITDAR adjusts for operating leases:
```
EV/EBITDAR = Enterprise Value / (EBITDA + Rent Cost)
```
Pre-IFRS 16, this mattered for lease-intensive sectors where operating leases were shown as a P&L expense (rather than as a capital lease) — hotels, airlines, restaurant chains, retail.
Logic
Operating-lease cost behaves like quasi-debt; EBITDAR neutralizes the own-vs-lease choice.
Post-IFRS 16 (2019)
Operating leases are capitalized, so EBITDA implicitly contains the lease adjustment — EBITDAR becomes less relevant. For US-GAAP comparisons against pre-IFRS-16 data, EBITDAR can still be useful.
Deep diveShow more details
Pitch tip
For hotel or retail chains reporting under IFRS 16, EV/EBITDA is back as the primary metric — use EBITDAR in a pitch only as a historical reference.