Case 47 / 183 Analyst
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Full EV-to-Equity Bridge

Valuation & DCF

The prompt

“As a valuation analyst, you are tasked with bridging Enterprise Value to Equity Value for a mid-cap industrial company, applying the full adjustment stack: net debt, minority interest, investments in associates, pension deficit, and capitalized lease liabilities.”

📋 What you're given

As a valuation analyst, you are tasked with bridging Enterprise Value to Equity Value for a mid-cap industrial company, applying the full adjustment stack: net debt, minority interest, investments in associates, pension deficit, and capitalized lease liabilities.

1. Task Overview

Task: bridge from Enterprise Value down to Equity Value per share by correctly applying — and correctly signing — every non-operating adjustment a full EV bridge requires beyond simple net debt.

Step 1: Given Data

The company's Enterprise Value and the full set of bridge items are shown below.

Line ItemValue
Enterprise Value$2,500m
Total Debt$600m
Cash & Equivalents$150m
Minority Interest (NCI)$80m
Investments in Associates$45m
Pension Deficit (net)$60m
Capitalized Lease Liabilities$120m
Diluted Shares Outstanding250m

Step 2: Net Debt

Show Net Debt Formula

Net Debt = Total Debt - Cash & Equivalents

Using this formula, compute Net Debt.

Step 3: Full Equity Value Bridge

Show Equity Value Bridge Formula

Equity Value = Enterprise Value - Net Debt - Minority Interest - Pension Deficit - Capitalized Lease Liabilities + Investments in Associates

Using this formula, compute Equity Value.

Step 4: Equity Value per Share

Show Equity Value per Share Formula

Equity Value per Share = Equity Value / Diluted Shares Outstanding

Using this formula, compute Equity Value per Share.

💡 Model answer

Try answering out loud first — then reveal the model answer and compare.

⚠️ Common mistakes

  • Forgetting to add back Investments in Associates — it's a plus, not a minus, since their earnings aren't consolidated into the operating cash flows behind Enterprise Value.
  • Treating Minority Interest as a plus instead of a subtraction — NCI represents cash flows that belong to other shareholders, not to the parent company's equity holders.
  • Using gross debt instead of net debt in the bridge, which overstates the debt-like claims against Enterprise Value.
  • Ignoring non-debt bridge items like pension deficits and capitalized lease liabilities, and only netting cash against debt.
  • Confusing an Enterprise Value multiple (e.g. EV/EBITDA) with an Equity Value multiple (e.g. P/E) when cross-checking the bridge output against trading comps.

🔁 Follow-up questions

← Previous Case 46: Sensitivity Analysis: WACC vs. Terminal Growth Rate Next Case 48: How PE Thinks About Valuation →

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