What Is Equity Multiple
Equity multiple measures how many times invested equity is returned over the life of a deal including periodic distributions and final sale proceeds while ignoring time value to complement IRR it highlights absolute payoff and payback strength for straightforward comparison.
Inputs and Cash Flows
Enter contributions as negative cash flows and distributions or sale proceeds as positive cash flows the tool totals invested and returned capital then divides returned by invested to produce equity multiple supporting irregular timing for practical transaction modeling and comparison.
Interpreting Results
An equity multiple above one indicates capital is preserved while values above two show the investment doubled net of contributions higher figures signal stronger absolute payoff yet identical multiples can mask different durations so review holding period when comparing opportunities.
Scenario and Sensitivity
Test scenarios by adding fees and promotes as negative flows and by adjusting exit proceeds observe how equity multiple shifts across cases link changes to business plan milestones and contingencies to understand breakevens and cushion levels that protect investor outcomes.
Limitations and Assumptions
Equity multiple does not reflect time value of money or reinvestment assumptions and can overstate appeal for long holds use alongside IRR payback and sensitivity checks verify cash flow classification and confirm fees debt service and reserves are handled consistently.
How to Use This Calculator
- List each equity contribution as a Contribution row and each distribution or sale as a Distribution row.
- Use positive numbers for all amounts. The calculator assigns contributions to invested and distributions to returned totals.
- Add fees promotes guarantees or reserves that reduce investor proceeds as Contribution rows.
- Press Calculate to compute totals and the equity multiple. Use Export CSV to save a record.
- Compare scenarios by changing timing or amounts and reviewing how the multiple and payback shift.
The Formula
Equity Multiple (EM) = Total Capital Returned to Equity ÷ Total Equity Invested.
Total capital returned includes all distributions and the net sale proceeds attributable to equity. Total equity invested is the sum of all capital contributions from equity. EM is a ratio and does not consider the time value of money.
1) What is a good equity multiple?
Context matters. Development may target higher multiples than stabilized acquisitions. Many sponsors view 1.8x to 2.2x over several years as competitive given risk profile and capital costs.
2) How does equity multiple differ from IRR?
Equity multiple measures absolute payoff while IRR measures annualized time weighted performance. A long slow deal and a quick flip can show the same multiple yet very different IRRs.
3) Should debt principal paydown be included?
Yes if paydown increases net sale proceeds accruing to equity. Include the actual equity cash flows not debt cash flows directly.
4) Can I include fees and promotes?
Yes. Model fees or promote catch up as negative equity flows which reduce total returned and therefore reduce the multiple.
5) What if there are reinvested distributions?
You can either net reinvestment from the distribution or add a separate contribution row to reflect the reinvestment back into the project.
6) Why does my multiple show as null?
The calculator needs positive invested capital to compute the ratio. Add at least one Contribution row.
7) Is equity multiple useful for pref equity or mezz?
It can be informative but layered capital often requires additional metrics such as current pay rate and accrued balance to fully capture outcomes.
- Use consistent signage by entering all numbers as positive and selecting the correct type.
- Include sale costs by reducing the final Distribution to equity.
- If contributions are funded from reserves record the equity impact not lender draws.
- Export your results for audit trail and comparisons.
Also called MOIC. Shows absolute payoff to equity.
Pair with IRR and hold period for balanced analysis.