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Enterprise Value Formula
EV = Market Cap + Total Debt - Cash
Enterprise Value is the theoretical takeover price — what a buyer would pay to acquire the entire business, including taking on its debt obligations and receiving its cash.
Why EV Instead of Market Cap?
Market cap only reflects equity value. EV accounts for capital structure:
- Company A: $1B market cap, $500M debt, $100M cash → EV = $1.4B
- Company B: $1B market cap, $0 debt, $100M cash → EV = $900M
Company A is actually 56% more expensive to acquire, even though they have the same market cap. EV corrects for this.
EV/EBITDA Benchmarks
| EV/EBITDA | Context |
|---|---|
| < 5× | Value / distressed |
| 6–10× | Traditional industries |
| 10–15× | Mid-market growth |
| 15–25× | High-growth businesses |
| 25×+ | Premium SaaS / hypergrowth |
EV/Revenue Benchmarks
| EV/Revenue | Context |
|---|---|
| < 1× | Deep value / declining |
| 1–3× | Traditional businesses |
| 3–10× | Growth businesses |
| 10×+ | High-growth SaaS |