---
title: "Enterprise Value"
url: "https://mahouse.world/glossary/enterprise-value"
type: "glossary term"
topic: "Valuation"
author: "Ihor Vlasov"
reviewed: "2026-09-20"
published: "2026-08-10"
---

# Enterprise Value

Enterprise value is the value of a company's operating business, independent of how it is financed: what a buyer would pay for the whole of it before settling its debt and taking its cash. It is the number a deal is priced on, and the numerator of the multiples — EV/EBITDA, EV/revenue — that acquisitions are compared by.

**Also known as:** EV, Firm value, Total enterprise value, TEV

## Key facts

- **Used at:** every stage of a deal, from the first indicative offer to the multiple quoted afterwards
- **Formula:** equity value + debt + debt-like items − cash and cash-like items (the "bridge")
- **Not the price paid to shareholders:** that is equity value, which comes out of the bridge
- **Typical fintech multiples (2025–26):** 3–8× revenue for growth software, 8–15× EBITDA for profitable payments
- **Watch for:** safeguarded client funds, which are neither the company's cash nor its debt

## How enterprise value works in practice

Two companies with the same operations are worth the same as businesses, whatever their balance sheets look like. Enterprise value is the number that says so: it strips out financing so that a company with €10m of debt and one with none can be compared, and it is why an offer letter says "€40m on a cash-free, debt-free basis" rather than naming a price for the shares. The price for the shares — equity value — is calculated from it at completion by adding the cash and subtracting the debt, and most of the argument in a deal is about which items go on which side of that bridge.

Debt is more than bank loans. Deferred consideration from the target's own acquisitions, unpaid corporation tax, dividends declared but not paid, an underfunded pension, accrued bonuses, deferred revenue for services still to be delivered: each is a claim on the company's cash that a buyer will have to meet, and each is argued as "debt-like". On the other side, cash is only cash if the company can use it — trapped cash abroad, minimum regulatory capital and, above all, client money and safeguarded funds are excluded, because they belong to customers.

Enterprise value is also the basis of comparison. A payments company sold at 12× EBITDA, a lender at 1.8× book, a software company at 6× annual recurring revenue: the multiples are of enterprise value, and quoting a deal by its equity value in a market that prices on enterprise value overstates or understates it by the balance sheet.

## Example

A buyer offers €60m of enterprise value for an e-money institution, cash-free and debt-free. The bridge at completion: cash of €4.2m (excluding €310m of safeguarded client funds), a €2.5m term loan, €0.9m of unpaid tax, and €1.1m of deferred revenue treated as debt-like after negotiation. Equity value is €60m + €4.2m − €2.5m − €0.9m − €1.1m = €59.7m. The deal is later reported at 11.5× EBITDA of €5.2m — a multiple of the €60m enterprise value, not of the €59.7m paid.

## Common mistakes

- Quoting an offer in equity value when the seller hears enterprise value, or the reverse — a difference of the whole balance sheet.
- Counting safeguarded or client funds as the company's cash in the bridge.
- Leaving "debt-like items" undefined in the letter of intent, so that every accrual is a negotiation at signing.
- Comparing an EV multiple with an equity multiple, or a revenue multiple with an EBITDA one.
- Forgetting deferred revenue: a company paid in advance owes its customers the service.

## Related terms

- [Equity Value](https://mahouse.world/glossary/equity-value.md)
- [EBITDA](https://mahouse.world/glossary/ebitda.md)
- [Free Cash Flow](https://mahouse.world/glossary/free-cash-flow.md)
- [Discounted Cash Flow](https://mahouse.world/glossary/discounted-cash-flow.md)
- [Weighted Average Cost of Capital](https://mahouse.world/glossary/weighted-average-cost-of-capital.md)
- [Locked Box](https://mahouse.world/glossary/locked-box.md)

— Ihor Vlasov, M&A FinTech Expert. Last reviewed 2026-09-20. https://mahouse.world/authors/ihor-vlasov