From headline price to the cash the seller actually receives
An 8x headline is rarely 8x at close. Bridge enterprise value to equity value with net debt, debt-like items, the working capital true-up and seller costs, then see what is paid at close and what is deferred or rolled.
- Closing NWC is $400K below the peg, which reduces the price dollar for dollar.
- Debt-like items are 5.4% of headline EV. Each one is likely to be negotiated.
- $500K of cash is excluded as trapped or minimum operating cash and is not paid for.
- The $2.4M escrow is deferred, not lost: it is released if no indemnity claims are made.
Headline price to cash at close
Dark bars add to the seller's proceeds, orange bars deduct. Equity value and cash at close are totals.
Purchase price bridge
| Amount | % of EV | |
|---|---|---|
| Headline enterprise value | $48,000,000 | 100.0% |
| Less: funded debt | −$14,000,000 | −29.2% |
| Plus: balance sheet cash | $2,500,000 | 5.2% |
| Less: trapped / minimum cash | −$500,000 | −1.0% |
| Less: Deferred revenue (cost to serve) | −$600,000 | −1.3% |
| Less: Accrued and unpaid bonuses | −$450,000 | −0.9% |
| Less: Unpaid pre-closing taxes | −$300,000 | −0.6% |
| Less: Capital / finance leases | −$800,000 | −1.7% |
| Less: Deferred capex | −$250,000 | −0.5% |
| Less: Customer deposits | −$200,000 | −0.4% |
| NWC adjustment (actual − peg) | −$400,000 | −0.8% |
| Less: seller transaction expenses | −$1,200,000 | −2.5% |
| Equity value | $31,800,000 | 66.3% |
| Less: escrow / holdback (deferred) | −$2,400,000 | −5.0% |
| Less: rollover equity (10%) | −$3,180,000 | −6.6% |
| Cash to seller at close | $26,220,000 | 54.6% |
Acquifolio records the final purchase price mechanics and freezes them as the entry baseline for the portfolio company.
A screening bridge. The SPA definitions of indebtedness, cash and working capital decide what actually counts. Not investment, tax or legal advice. Everything runs in your browser and nothing you enter is stored or sent.
How it works
Headline EV is EBITDA × multiple or a value you enter, on a cash-free, debt-free basis.
Equity value = EV − funded debt + (cash − trapped cash) − debt-like items + (closing NWC − peg) − seller transaction expenses.
Cash at close = equity value − escrow / holdback − rollover equity. Escrow is deferred consideration, paid out later if no claims are made. Rollover is value the seller reinvests in the buyer's vehicle.
Leakage beyond net debt = debt-like items + trapped cash + NWC shortfall + seller expenses, shown as a share of headline EV. Effective EV/EBITDA is (EV − leakage) ÷ EBITDA, the multiple the seller is really paid once these items are counted.
Questions
What are debt-like items in a purchase price?+
Obligations that are not funded debt but will cost the buyer cash after closing: unpaid pre-closing taxes, accrued bonuses and commissions, deferred revenue that must be serviced, finance leases, deferred capex, customer deposits, unfunded pensions, earn-outs from prior acquisitions and declared but unpaid dividends. Buyers deduct them from the price; sellers argue they belong in working capital or are already reflected in EBITDA.
How does the working capital adjustment work?+
The parties agree a normalized NWC target, the peg. If NWC delivered at closing is below the peg, the price falls dollar for dollar; if it is above, the price rises. Watch for double counting: an item in the NWC definition should not also be deducted as debt-like.
What is trapped or minimum cash?+
Cash the business needs to operate or cannot freely move, such as cash in foreign subsidiaries, customer deposits held in cash or a minimum operating balance. Buyers often exclude it from the cash credit, so the seller is not paid for it.
Is escrow money lost to the seller?+
No. It is consideration held back, typically 5–10% of equity value for 12–18 months, to cover indemnity claims. It is released to the seller if no claims are made. With representation and warranty insurance, escrows are often much smaller.
Why is equity value different from cash at close?+
Equity value is the full price for the shares. Part of it may be withheld in escrow, paid later as deferred consideration, or reinvested by the seller as rollover equity in the buyer's structure.
Set a normalized NWC target from monthly balances, see seasonality and the closing purchase price adjustment.
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