What Is Enterprise Value Bridge?

Enterprise value bridge is the analytical walk from headline enterprise value to cash each shareholder class receives—making implicit deductions explicit.

How it works

Typical bridge steps:

1. Enterprise value — negotiated purchase price for operations.
2. Less net debt (debt minus cash) → implied equity value.
3. Adjust for working capital true-up, transaction expenses, escrow holdbacks.
4. Apply liquidation waterfall — preferred preferences, participation, dividends.
5. Allocate remaining common proceeds by share count.

Example bridge: EV $200M, net debt $30M → equity value $170M. Less $5M fees and $10M escrow → $155M distributable. Series B with 2× preference takes $80M first; remainder flows to Series A and common per charter.

Investment bankers and counsel build bridges in Excel; founders should model before signing LOIs.

Why it matters

• Founders: Common mistake is stopping at EV. The bridge shows whether your 10% common stake pays anything after preferences and debt.
• Investors: Each preferred class models its bridge outcome; conflicts arise on working capital definitions and escrow sizing.
• Board: Fiduciary sale process requires understanding best price to each class, not only EV headline.

Common mistake

Ignoring transaction fees and management carve-outs in mental math. Bridges reveal that EV growth does not linearly increase founder take-home when debt and preferences also scale.

Related ideas

• Enterprise Value — starting point
• Equity Value — bridge output for shareholders
• Waterfall analysis — preferred stack ordering
• Escrow — common bridge deduction