Mergers & Acquisitions, Transaction Advisory & Deal Closing Mechanics
M&A EV-to-Equity Bridge, Working Capital Peg & Wire Formula
Calculate M&A Completion-Accounts Closing Net Debt (Debt - Cash), Dollar-for-Dollar Net Working Capital (NWC) Peg Adjustment (Actual_NWC - Target_Peg), Adjusted Equity Purchase Price, and Day-1 Seller Wire Proceeds Net of Escrow.
Prevent sign-flip errors in M&A Cash-Free Debt-Free EV-to-Equity closing funds flows!
Nearly every private M&A Letter of Intent quotes a "Cash-Free, Debt-Free" Headline Enterprise Value assuming normalized working capital—yet sellers receive Adjusted Equity Value wired at closing! Converting Headline EV into Equity Purchase Price requires three exact completion-accounts adjustments: ADD Unrestricted Closing Cash, SUBTRACT Closing Financial & Debt-Like Items (unpaid bonuses, customer deposits, accrued income taxes -> Net Debt = Debt - Cash), and apply a dollar-for-dollar Net Working Capital (NWC) True-Up = Actual_Closing_NWC - Contractual_NWC_Peg! Reversing the NWC sign is a notorious junior deal-team mistake: delivering LESS working capital than the Peg ($14.5M vs $16.0M) REDUCES Equity Value because the buyer must inject cash post-close to replenish inventory and receivables! Finally, subtracting Indemnity/Adjustment Holdback Escrow yields Day-1 Seller Cash Wire Proceeds!
Build a Closing Funds-Flow Schedule—Headline_Enterprise_Value = $120.00M (B2), Unrestricted_Closing_Cash = $8.00M (B3), Closing_Debt_&_DebtLike = $25.00M (B4 -> Net Debt = $17.00M in E2), Delivered_Closing_NWC = $14.50M (B5), Target_NWC_Peg = $16.00M (B6 -> NWC Shortfall Adjustment = -$1.50M in E3), and Indemnity_Escrow_Holdback = $5.00M (B7): Adjusted Equity Purchase Price is 120 + 8 - 25 + (14.5 - 16.0) = $101.50M (E4), and Day-1 Seller Cash Wire is 101.50 - 5.00 = $96.50M (E5)! In a shared Arte Sheets deal room where an M&A advisor has suggester access, review their proposed NWC peg cell formula and test both a shortfall ($14.5M) and a surplus ($18.0M) before the workbook owner accepts the suggestion!
| M&A Closing Bridge ($120M EV, $8M Cash, $25M Debt, $14.5M NWC vs $16M Peg, $5M Escrow) | Formula | Verified Output |
|---|---|---|
| Closing Net Debt ($M) | Closing_Debt_&_DebtLike - Closing_Cash | $17.00M |
| NWC Peg True-Up ($M) | Actual_Closing_NWC - Target_NWC_Peg | -$1.50M (+$2.00M @ $18M NWC) |
| Adjusted Equity Purchase Price | EV - Net_Debt + (Actual_NWC - Peg) | $101.50M ($105.00M @ $18M NWC) |
| Day-1 Seller Wire Proceeds ($M) | Adjusted_Equity_Price - Holdback_Escrow | $96.50M |
M&A Completion-Accounts Adjusted Equity Value Formula
Validate Headline_EV > 0, non-negative Cash, Debt, and Escrow, and positive net Seller Wire proceeds (Adjusted_Equity > Escrow)!
=LET(ev_h, B2, cs_c, B3, db_c, B4, nw_a, B5, nw_p, B6, es_c, B7, IF(OR(ev_h <= 0, cs_c < 0, db_c < 0, es_c < 0, (ev_h + cs_c - db_c + (nw_a - nw_p)) <= es_c), "Invalid M&A Closing Bridge", ROUND(ev_h + cs_c - db_c + (nw_a - nw_p), 2)))Surplus Working Capital Delivery Check (Set Actual Closing NWC = $18.00M)
Raise Actual_Closing_NWC B5 to $18.00M ($2.00M above the $16.00M Peg): NWC Adjustment E3 flips to +$2.00M and Adjusted Equity Purchase Price E4 increases to $105.00M!
=IF(ISTEXT(E2), E2, ROUND(B5 - B6, 2))Try the example
Use the original values or change them to test your understanding.