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Module II· EV-Equity BridgeIntermediate
Question

Worked example — MidCap Machinery Inc: EV $1,200m, Net Debt $250m, pension underfunding $80m (after-tax), NCI $30m. Calculate the equity value.

Answer
Mechanics

Equity value = EV − Net Debt − pension − NCI = 1,200 − 250 − 80 − 30 = $840m. Sanity check: bridge total $360m = 30% of EV − typical for a traditional industrial business with moderate leverage and large pension obligations. For a PE sponsor the bridge is often small (10–15%); for mature large-caps 25–40%. If further items are relevant (operating leases $40m, litigation reserve $15m after-tax): equity = 840 − 40 − 15 = $785m.

Deep diveShow more details
Pitch tip

'The EV-Equity bridge subtracts 30% of EV − driven by traditional pension underfunding and moderate net leverage; common for an established middle-market industrial.'

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