Look for whether return of capital, refi proceeds, sale proceeds, and interim distributions are included.
Plain-English term
Equity multiple
Total cash returned divided by the original cash invested.
Definition that survives review
Equity multiple tells you how many dollars come back for each dollar invested, before you pretend timing does not matter. In a real review, translate the term into the cash flow, priority, deadline, tax treatment, status test, or control right it changes.
Use it to measure total cash returned per dollar invested after timing gets discussed separately. If you cannot point to the exact document or calculation behind it, you have recognized the vocabulary but not yet understood the deal.
Why it matters
It is the antidote to IRR theater. IRR loves speed; equity multiple asks how many total dollars actually came home. This is why the term is not finished until you know who calculated it, what period it covers, and what happens if the friendlier definition is wrong.
A useful glossary entry should show where the word appears, what input changes it, and which connected term changes the answer next: IRR, Cash-on-cash return, Waterfall.
How to use it in diligence
Total distributions and proceeds / invested equity = equity multiple
$190,000 back on a $100,000 investment is a 1.90x equity multiple. It matters whether that took 3 years or 9.
A big multiple over a very long hold can still be a mediocre annual return.
Proof checklist
- The source period, calculation basis, and owner of the number are named.
- The term reconciles to the PPM, operating agreement, lender documents, tax schedule, underwriting model, or verification record.
- The downside version is visible before the optimistic version gets trusted.
Example, trap, question
$190,000 back on a $100,000 investment is a 1.90x equity multiple. It matters whether that took 3 years or 9.
A big multiple over a very long hold can still be a mediocre annual return.
- whether the multiple includes return of capital, refinance proceeds, sale proceeds, and projected cash flow.
- What source document, schedule, or third-party evidence proves this term in this specific deal?
- Which connected term changes the answer next: IRR, Cash-on-cash return, Waterfall?
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