What is enterprise value (EV)?
Enterprise value (EV) is market capitalization plus debt, minus cash: an estimate of what the whole business is worth to all of its owners and lenders. It is often described as the theoretical price to buy the company before any takeover premium, since a buyer takes on the debt and gets the cash. EV is the top half of multiples such as EV/EBITDA and EV/sales.
Why it matters to a revenue leader
Enterprise value links public markets and private equity. Sponsors price acquisitions and exits on EV, most often as a multiple of EBITDA, so every dollar of durable EBITDA the revenue team adds is worth that multiple at exit. At a public company, EV/EBITDA lets investors compare businesses that carry very different amounts of debt. Revenue the market trusts to repeat, such as recurring service agreements, tends to earn a higher multiple.
How to calculate it
EV = market capitalization + total debt + preferred stock + noncontrolling interest − cash and cash equivalents. The simple version drops preferred stock and noncontrolling interest. A common mistake is forgetting to subtract cash.
Example
Fictitious numbersA public environmental services company has a market cap of $2.4 billion, $900 million of debt and $300 million of cash. Its EV is $3.0 billion. With EBITDA of $250 million, it trades at 12 times EV/EBITDA. Adding $10 million of recurring EBITDA at that multiple adds about $120 million of enterprise value.
"Which part of our revenue would a buyer pay the highest multiple for, and is my team growing it?"
Sources
- Enterprise Value (EV) checked 9 Oct 2026
- Enterprise Value (EV) Formula and What It Means checked 9 Oct 2026