The headline exit is only the starting point.
A pro-rata exit model multiplies the equity value available to shareholders by the ownership held at exit. Comparing those proceeds with invested capital gives a gross return multiple.
Enterprise value and equity value are different. Debt, cash, transaction expenses and the distribution waterfall determine what is available to shareholders. Preferred share rights may also make actual proceeds differ from a pro-rata allocation.
The formula, made clear.
- Gross gain
- Proceeds minus original investment.
- Gross multiple
- Proceeds divided by original investment.
Put the numbers in context.
A 10% stake in a $100M equity exit produces $10M in gross proceeds. Against a $1M investment, that is a 10× multiple and a $9M gross gain.
| Input | Example value |
|---|---|
| Exit equity value | $100,000,000.00 |
| Ownership at exit | 10% |
| Original investment | $1,000,000.00 |
| Gross exit proceeds | $10,000,000.00 |
What this calculation assumes
Pro-rata distribution with no preferences, fees, tax, carry or further dilution. Exit value is equity value, not enterprise value.
What to consider next.
Model a downside outcome and review the liquidation waterfall before interpreting a headline exit as cash proceeds.
How we approach financial models →