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Deal Value vs Enterprise Value Bridge Calculator

Calculate deal value from enterprise value using the deal value bridge, adjusting for cash, debt, working capital, and debt-like items.

Deal Value vs Enterprise Value Bridge Calculator

Calculate deal value from enterprise value using the deal value bridge, adjusting for cash, debt, working capital, and debt-like items.

Input your deal value bridge components

Capital leases, pensions, etc.

Formula

Net Debt = Total Debt - Cash and Cash Equivalents

Working Capital Adjustment = Working Capital Actual - Working Capital Target

Deal Value = Enterprise Value + Cash and Cash Equivalents - Total Debt - Debt-Like Items ± Working Capital Adjustment

Equity Value = Enterprise Value - Net Debt

The deal value bridge reconciles enterprise value (total value paid for the business) with the actual deal value received by the seller. It accounts for cash (added), debt and debt-like items (subtracted), and working capital adjustments (ensuring normal working capital levels). Deal value represents the net amount the seller receives after all transaction adjustments.

Steps

  • Enter enterprise value (deal EV).
  • Enter cash and cash equivalents and total debt.
  • Optionally enter working capital target and actual, and debt-like items.
  • Review deal value and equity value calculations.

Additional calculations

Enter your deal value bridge components to see additional insights.

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The Complete Guide to Deal Value vs Enterprise Value Bridge: M&A Transaction Value Reconciliation

A comprehensive look at calculating deal value from enterprise value using the deal value bridge, adjusting for cash, debt, working capital, and debt-like items.

Table of Contents: Jump to a Section

Understanding Deal Value Bridge

The deal value bridge reconciles enterprise value with the actual deal value or equity value received by the seller in M&A transactions.

Bridge Components

Key components include cash (added), debt and debt-like items (subtracted), and working capital adjustments.

Working Capital Adjustment

Working capital adjustments ensure the company is delivered with normal working capital levels, adjusting deal value accordingly.

Calculation Steps

Deal Value = EV + Cash - Debt - Debt-Like Items ± Working Capital Adjustment

Practical Application

Use deal value bridge to determine the net amount sellers receive and to understand transaction value reconciliation.

Conclusion

The deal value vs enterprise value bridge is essential in M&A transactions for reconciling enterprise value with the actual deal value received by sellers. It accounts for cash, debt, working capital adjustments, and debt-like items to determine the net purchase price. Understanding and applying this bridge ensures transparency and accuracy in transaction value determination.

FAQs

What is deal value vs enterprise value bridge?

The deal value vs enterprise value bridge reconciles enterprise value (the total value paid for the business) with the actual deal value or equity value received by the seller. It adjusts for cash, debt, working capital deviations, and other items to determine the net amount the seller receives.

How is deal value calculated?

Deal Value = Enterprise Value + Cash and Cash Equivalents - Total Debt - Debt-Like Items ± Working Capital Adjustment. Working Capital Adjustment = Working Capital Actual - Working Capital Target. If actual working capital is below target, the adjustment reduces deal value. If above target, it increases deal value.

What is working capital adjustment?

Working capital adjustment ensures the company is delivered with a normal level of working capital. If actual working capital at closing is below target (typically historical average), the seller pays the buyer (reduces deal value). If actual exceeds target, the buyer pays the seller (increases deal value). This prevents buyers from receiving companies with insufficient working capital.

What are debt-like items?

Debt-like items are obligations that resemble debt but may not be classified as traditional debt, such as: capital leases, pension liabilities, legal reserves, environmental liabilities, deferred compensation, and other long-term obligations. These reduce deal value as they represent obligations the buyer assumes.

How does cash affect deal value?

Cash and cash equivalents increase deal value because they represent assets the buyer receives. The buyer pays enterprise value for operations, and cash on the balance sheet is an additional asset. Therefore, cash is added to enterprise value in calculating what the seller receives.

Why is debt subtracted from deal value?

Debt is subtracted because the buyer typically assumes or pays off the target company's debt obligations. Since debt represents claims on the company that must be satisfied, it reduces the net amount the seller receives. The buyer pays the enterprise value, then settles the debt, reducing the effective purchase price.

What is the difference between deal value and equity value?

Deal value and equity value are often used interchangeably, but deal value may include transaction-specific adjustments (like working capital) while equity value is the pure equity value. Deal value = what the seller receives after all adjustments. Equity value = Enterprise Value - Net Debt (simplified version without working capital adjustments).

How do I set working capital target?

Working capital target is typically set as: the average of the last 12 months of working capital, a percentage of revenue or cost of goods sold, or a negotiated amount. It represents the "normal" level of working capital needed to operate the business. Targets are often based on historical averages or industry benchmarks.

What if working capital adjustment is negative?

A negative working capital adjustment (actual < target) reduces deal value because the seller delivers the company with insufficient working capital. The seller effectively pays the buyer for the shortfall. Conversely, positive adjustments (actual > target) increase deal value as the buyer receives excess working capital.

How does this bridge differ from standard EV bridge?

The deal value bridge includes working capital adjustments and may include transaction-specific items, making it more comprehensive for M&A transactions. The standard EV-to-equity bridge (Enterprise Value - Debt + Cash) is simpler and doesn't include working capital adjustments. Deal value bridge is transaction-specific and reflects the actual deal terms.

Summary

This tool calculates deal value from enterprise value using the deal value bridge, adjusting for cash, debt, working capital, and debt-like items.

Outputs include deal value, equity value, net debt, working capital adjustment, interpretation, recommendations, an action plan, and supporting metrics.

Formula, steps, guide content, related tools, and FAQs ensure humans or AI assistants can interpret the methodology instantly.

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Deal Value vs Enterprise Value Bridge Calculator

Calculate deal value from enterprise value using the deal value bridge, adjusting for cash, debt, working capital, and debt-like items.

How to use Deal Value vs Enterprise Value Bridge Calculator

Step-by-step guide to using the Deal Value vs Enterprise Value Bridge Calculator:

  1. Enter your values. Input the required values in the calculator form
  2. Calculate. The calculator will automatically compute and display your results
  3. Review results. Review the calculated results and any additional information provided

Frequently asked questions

How do I use the Deal Value vs Enterprise Value Bridge Calculator?

Simply enter your values in the input fields and the calculator will automatically compute the results. The Deal Value vs Enterprise Value Bridge Calculator is designed to be user-friendly and provide instant calculations.

Is the Deal Value vs Enterprise Value Bridge Calculator free to use?

Yes, the Deal Value vs Enterprise Value Bridge Calculator is completely free to use. No registration or payment is required.

Can I use this calculator on mobile devices?

Yes, the Deal Value vs Enterprise Value Bridge Calculator is fully responsive and works perfectly on mobile phones, tablets, and desktop computers.

Are the results from Deal Value vs Enterprise Value Bridge Calculator accurate?

Yes, our calculators use standard formulas and are regularly tested for accuracy. However, results should be used for informational purposes and not as a substitute for professional advice.