Multiple expansion is selling an asset at a higher valuation multiple than was paid to acquire it — for example, buying at 8× EBITDA and exiting at 11×. When earnings are held constant, expansion of the multiple alone increases enterprise value, and it is one of the principal levers a private-equity owner underwrites.
Not every gain in the multiple is expansion earned by performance. Some is structural — the market re-rating the sector, or a larger combined entity commanding a higher multiple than its parts (multiple arbitrage). Performance-driven multiple expansion is what an operator's realized benefits add up to at exit: the sum of captured benefits, credited to the business's improved quality, is what justifies a buyer paying a higher multiple.