M&A transactions are  measured with two primary metrics:  internal rate of return and cash-on-cash return.

Internal Rate of Return (“IRR”) is the annualized effective compounded percentage return that makes the net present value of all cash flows from a particular investment equal to zero. Put simply, if you bought Apple stock five years ago and you measured your average annualized compounded return over the last five years, that would be your IRR.  Whether the stock went up or down in any given period within that five-year window is irrelevant—this provides the average annualized return.

You can’t spend IRR.  For a measure of absolute return you can spend, use Cash-on-Cash Return. Cash-on-Cash Return is also sometimes referred to as Multiple of Cost, Return on Invested Capital (“ROIC”), or Return on Equity (“ROE”).  It is calculated as follows.