What Is Enterprise Value?

Enterprise value (EV) measures the value of a company’s core business to all capital providers—equity holders and debt holders combined.

How it works

Standard formula:

Enterprise value = equity value + total debt − cash and equivalents

Equity value is what shareholders would receive if debt were paid from sale proceeds (simplified). A company with $100M equity value, $20M debt, and $10M cash has EV of roughly $110M.

Acquirers quote EV because they care about operating worth independent of how the cap table is levered. Public market EV uses market cap plus net debt; private deals derive EV from negotiation or multiples on EBITDA.

Venture startups often have minimal debt and EV ≈ equity value until venture debt, revenue-based financing, or late-stage leverage appears.

Why it matters

• Founders: Headline “$500M acquisition” may be EV; your proceeds depend on liquidation stack, debt paydown, and transaction fees—see equity value.
• Investors: Compare deals across capital structures using EV/EBITDA or EV/revenue.
• Lenders: Covenants reference EBITDA and sometimes EV in restructurings.

Common mistake

Using pre-money valuation from a VC round as enterprise value. VC valuations are equity value for a specific share class context—they ignore net debt and are not M&A EV without adjustment.

Related ideas

• Equity Value — value to shareholders after net debt
• Enterprise Value Bridge — walk from EV to equity
• Enterprise Value to EBITDA — common multiple
• Net debt — debt minus cash