Enterprise Value
Also known as: EV
Definition
Enterprise Value, or EV, represents the value of the operating business before deciding how that value is split between debt and equity holders. In transaction work, EV is the base for valuation multiples, purchase price discussion, and debt-free cash-free mechanics.
Enterprise value is not the same as proceeds to shareholders. Debt, cash, working capital, transaction expenses, preferences, and earnouts can all change what owners receive.
Operators should understand the EV bridge before a buyer turns it into a negotiation.
Related terms
- Cap Table — The ownership record showing equity, options, warrants, SAFEs, notes, and other claims on a company.
- EBITDA — Earnings Before Interest, Taxes, Depreciation, and Amortization. The proxy for operating cash flow that PE buyers use to set valuation multiples.
- Valuation Multiple — A ratio used to value a company against EBITDA, revenue, ARR, gross profit, or another operating metric.
Where this gets applied
- Unit Economics — CAC payback, NRR, gross margin by segment, cohort analysis, paid-on-bookings vs. paid-on-cash.
- Financial Infrastructure — ARR waterfalls, deferred-revenue rules, board-pack standardization, FP&A architecture.
- Exit Readiness — Pre-LOI cleanup. Financial reporting normalization, contract hygiene, IP assignment review, customer-concentration mitigation.