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Multiple Expansion Math

Deconstruct enterprise value creation to isolate operational growth from market-driven multiple arbitrage.

JavaScript Required: This interactive calculator requires JavaScript to function. Below is the static mathematical framework.

Entry EBITDA

Exit EBITDA

Entry Multiple

Exit Multiple

Total EV Creation

Value from EBITDA Growth

Value from Multiple Expansion

Value from EBITDA Growth:

(Exit EBITDA - Entry EBITDA) × Entry Multiple

We use the Entry Multiple to isolate the value created purely by operational improvement, assuming the market valuation environment didn't change.

Value from Multiple Expansion:

(Exit Multiple - Entry Multiple) × Exit EBITDA

We apply the multiple arbitrage to the Exit EBITDA because the higher multiple is being paid on the larger, improved earnings base at exit.