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