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.
Also known as: Cash-free / debt-free adjustment
One-line definition
Net Debt = Gross debt + debt-like items − Cash and cash equivalents.
Why TS cares
Deals are typically priced on a cash-free, debt-free basis. Equity Value = Enterprise Value (multiple × EBITDA) minus Net Debt at closing. Every euro you add to Net Debt is a euro out of the seller's pocket — which is why Net Debt is one of the most negotiated TS schedules.
What counts as "debt-like"
- Financial debt (bank loans, bonds, overdrafts).
- Lease liabilities (IFRS 16 treatment matters — confirm the base).
- Accrued interest and unpaid coupons.
- Shareholder loans and related-party balances.
- Unfunded pension deficits.
- Tax provisions relating to historical periods.
- Deferred consideration from prior M&A.
Interview angle
Junior candidates often stop at "debt minus cash". Seniors want to hear about debt-like items — that's where deal value moves.
Related terms
EBITDA
Earnings Before Interest, Taxes, Depreciation and Amortisation — the most cited profitability proxy in M&A.
Net Working Capital (NWC / WCR)
Net Working Capital (NWC), also called Working Capital Requirement (WCR) — the normalised working capital a target needs to operate, and a direct lever on the M&A purchase price.
Quality of Earnings
The TS work-product that bridges reported EBITDA to a defensible run-rate figure a buyer can underwrite.