Net Debt

Net debt is, in principle, the sum of interest-bearing liabilities less cash and cash equivalents. In M&A transactions, however, this definition is regularly supplemented by further items. So-called ‘debt-like items’ — e.g. pension obligations, provisions for onerous contracts or outstanding bonuses — are frequently treated like financial liabilities and added to net debt.

Which items are to be classified as ‘debt-like’ or ‘cash-like’ is regularly the subject of intensive negotiation. The specific delineation is one of the central value levers in the equity bridge, since it directly affects the equity value to be derived from the enterprise value.