Bridge from EV to Equity Value
The waterfall of adjustments — primarily net debt and working capital — that converts Enterprise Value into the actual equity price paid at closing.
Also known as: EV to equity bridge, Price bridge
One-line definition
The EV-to-equity bridge is the structured deduction table every TS report includes to show how the headline multiple translates to cash in the seller's pocket.
Typical structure
Enterprise Value (EV) xxx
− Financial debt (xxx)
− Debt-like items (xxx)
+ Cash xxx
± NWC adjustment vs peg ±xxx
± Other price adjustments ±xxx
= Equity Value xxx
Interview importance
Knowing this bridge cold — and being able to populate each line — is essential for any TS or M&A interview.
Related terms
Enterprise Value (EV)
The total value of a business, representing what a buyer pays for 100% of the company on a cash-free, debt-free basis.
Equity Value
The value of the shareholders' stake in a business, derived by subtracting net debt from enterprise value.
Net Debt
The gap between Enterprise Value and Equity Value in a deal — gross debt minus cash, plus a long list of debt-like items.
Net Working Capital
The normalised level of working capital a target business needs to operate — a direct lever on the purchase price.
NWC Peg / NWC Target
The normalised level of net working capital expected to be in the business at closing, used as the reference point for any completion accounts adjustment.