Mergers and Acquisitions
Reconcile the closing price
What you will learn
Bridge enterprise value to the cash paid for equity at closing.
Illustrative equity price = EV − net debt + (closing working capital − peg)
Start from agreed enterprise value and apply the sale agreement’s debt, cash and debt-like definitions. Compare delivered working capital with the peg on the same basis. Confirm whether each item belongs to net debt or working capital and reconcile adjustments to the closing statement. A fictional buyer agrees ₹200 crore EV, ₹30 crore net debt and receives working capital ₹4 crore below the peg. Equity consideration is ₹166 crore.
A fictional buyer agrees ₹200 crore EV, ₹30 crore net debt and receives working capital ₹4 crore below the peg. Equity consideration is ₹166 crore.
Start from agreed enterprise value and apply the sale agreement’s debt, cash and debt-like definitions. Compare delivered working capital with the peg on the same basis. Confirm whether each item belongs to net debt or working capital and reconcile adjustments to the closing statement. A fictional buyer agrees ₹200 crore EV, ₹30 crore net debt and receives working capital ₹4 crore below the peg. Equity consideration is ₹166 crore.
What normally happens in this simple bridge if delivered working capital falls below the peg?