Module II· Trading ComparablesAdvanced
Question
Which net-debt definitions exist, and how do they affect multiples?
Answer
Mechanics
Net-debt definitions vary across Bloomberg, CapitalIQ, and Reuters:
- 'Strict net debt': total debt − cash.
- 'Adjusted net debt': adds lease liabilities (post-IFRS 16), pension liabilities, preferred equity, and NCI.
- 'CapIQ default': often includes more debt-like items than Bloomberg.
Deep diveShow more details
Consequence
EV (= market cap + net debt) varies by definition — it can differ by 5−15%. Across the comp set, the net-debt definition MUST be consistent for every company. Solution: compute the net-debt components manually per company, don't blindly use the Bloomberg default.
Pitch tip
'We use adjusted net debt including pension underfunding and IFRS 16 lease liabilities — consistent across all comps.' Junior-killer: blindly taking EV from Bloomberg without checking the net-debt definition.