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EV → equity bridge — from enterprise to equity value

The price in a share purchase agreement is for equity, while valuations and multiples speak of the enterprise. Between the two lies a bridge: net debt, debt-like items and working capital. Eight numbers show how much of enterprise value actually reaches the owners.

Enterprise value (EV)PLN mfrom a valuation, a multiple or an offerInterest-bearing debtPLN mloans, bonds, shareholder loansCash on accountsPLN mOperating cash (required)PLN mwhat must stay so the company pays on timeLeases and other debt-like financial liabilitiesPLN mDeclared, unpaid dividendPLN mOther debt-like itemsPLN mdisputes, tax arrears, severance, provisionsWorking-capital gap versus normal levelPLN mpositive when WC is below the 12-month average

Equity value

15,1 PLN m

Net debt (debt − excess cash): -2,3 PLN m
Debt-like items: -1,2 PLN m
Working-capital adjustment: -0,3 PLN m
Share of EV taken by the bridge: 20 %

The bridge takes a small part of value — the price for shares is close to enterprise value. What remains to police in the SPA is mainly the definition of cash and debt.

An indicative tool: the result is an order of magnitude on your assumptions, not a valuation or tax, legal or investment advice. Data entered into the form is never sent or stored anywhere.

How it is computed

1Net debtInterest-bearing debt (loans, bonds, shareholder loans) minus excess cash. Excess = cash on accounts minus operating cash, i.e. what the company must hold to pay on time. Cash on the account on 31 December that goes to payroll on 5 January is not excess.
2Debt-like itemsLiabilities that are not loans but the buyer will have to pay: finance leases, declared but unpaid dividends, disputes with provisions, tax and contribution arrears, severance, investment commitments. Each item lowers the price złoty for złoty.
3Working capital versus the normal levelIf on the closing date working capital is below the average of the last twelve months (the seller “squeezed” receivables or stretched suppliers), the buyer will have to rebuild it from their own pocket — the difference reduces the price. Above the norm it works the other way.

Note: the bridge from enterprise value to equity value (PDF)

Frequently asked questions

Is an operating lease debt?

Under Polish accounting rules often not, under IFRS 16 yes. In a transaction the economics matter: if the company cannot stop paying the instalments without losing the machines, it is a debt-like liability. Foreign buyers will treat it as debt almost always — better to enter it and have an argument than to be surprised.

How to set “normal” working capital?

The average of twelve monthly balance sheets (receivables + inventory − trade payables), adjusted for seasonality and one-offs. It is one of the most negotiated numbers in the agreement — worth computing yourself before the other side does.

Where does enterprise value (EV) come from?

From a valuation (DCF, multiples), from a buyer’s offer or from the valuation calculator on this site. What matters is that EV and the bridge come from the same date — an EV valued at year-end and debt from the middle of the next year give a number that cannot be defended.

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