01Enterprise value and purchase price
Why enterprise value and equity value diverge and where in the transaction that gap arises.
Guide
The Equity Bridge at Exit, Explained
Enterprise value and purchase price often differ significantly. The Equity Bridge explains this deviation.
- Enterprise value is determined 'debt-free, cash-free'.
- Working Capital and debt-like items are crucial.
- The price is secured through clean financials.
PDFContents
What's inside
01
02Structure of the equity bridge
Which building blocks turn enterprise value into the amount paid, and in what order they are applied.
03Debt-free, cash-free
What the valuation principle means for financial debt and surplus cash, and which definitions tend to be contested.
Working capital peg
How the working-capital target is set, which reference period counts and where seasonality bites.
Debt-like items
Which balance-sheet items buyers treat as debt-like — from pension commitments to accrued liabilities.
Locked box and closing accounts
How the two mechanisms allocate price certainty and risk, and what evidence each one requires.
Author
Who wrote the guide
Lorenzo LenhardInvestment Professional @ FeldbergInvestment Professional with over five years of private equity and investment banking experience. He previously worked at a tech and software focused fund investing in the German mid market out of Munich.
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