Formula
How to Calculate EBITDA Multiple
A valuation metric expressing a company's value as a multiple of its EBITDA — commonly used in growth equity and private equity but less in early-stage VC.
EBITDA Multiple
EBITDA Multiple = Enterprise Value / EBITDA
Where
- EV
- = Enterprise Value
- EBITDA
- = Earnings Before Interest, Taxes, Depreciation & Amortization
What Is EBITDA Multiple?
An EBITDA multiple is the ratio of a company's enterprise value to its EBITDA: Enterprise Value / EBITDA. It's the primary valuation methodology for profitable businesses in private equity and growth equity. Example: a company with $20M EBITDA valued at $200M is trading at 10x EBITDA. EBITDA multiples vary significantly by industry, growth rate, and market conditions. High-growth software companies may trade at 20-30x EBITDA; slower-growth industrial businesses at 5-8x. For early-stage VC, EBITDA multiples are irrelevant (companies are pre-profit) — ARR multiples and DCF are more applicable. EBITDA multiples become relevant as companies approach profitability and contemplate later-stage growth equity or PE transactions.
Worked Example
DataCorp generates $8M in annual EBITDA and receives a $120M acquisition offer from a strategic buyer, implying a 15x EBITDA multiple. Growth equity firm Northpoint compares this to recent SaaS transactions averaging 12-18x EBITDA for similar growth profiles. When DataCorp was raising their Series C two years earlier, early-stage VCs valued them on revenue multiples since EBITDA was minimal. Now profitable, the EBITDA multiple provides a more stable valuation framework. Northpoint's analysis shows DataCorp's multiple is justified by 25% EBITDA growth and strong recurring revenue, but notes that multiples have compressed from 20x+ during the 2021 peak.
Why EBITDA Multiple Matters
EBITDA multiples provide valuation stability that revenue multiples can't match, especially during market downturns when growth-at-all-costs models fall out of favor. For profitable scale-ups, these multiples offer predictable exit benchmarks and help founders understand how operational improvements directly translate to enterprise value. Growth investors use EBITDA multiple expansion as a key value creation lever — improving margins from 20% to 30% can dramatically increase exit multiples. Understanding sector-specific multiple ranges helps in fundraising negotiations and strategic planning.
Related Terms
Frequently Asked Questions
How do you calculate EBITDA Multiple?
EBITDA Multiple is calculated using the formula: EBITDA Multiple = Enterprise Value / EBITDA. A valuation metric expressing a company's value as a multiple of its EBITDA — commonly used in growth equity and private equity but less in early-stage VC.
What is a good EBITDA Multiple?
What constitutes a "good" EBITDA Multiple depends on context — the fund's stage, vintage year, and strategy. Check our benchmarks and calculators for specific ranges.