Net Debt

Net debt takes in bank borrowings, bonds, shareholder loans and finance leases, less cash, bank balances and short-term marketable securities. Unfunded Pension Provision, overdue tax and unpaid bonuses are often treated as debt-like in DACH mid-market deals. Surplus cash the business does not need is usually netted off. Net debt is the bridge from Enterprise Value to Equity Value: equity value = EV minus net debt.

Example

Bank loans 2.5 million euros, shareholder loans 0.5 million, leases 0.3 million, cash 0.2 million, bank balances 0.8 million. Net debt = 2.5 + 0.5 + 0.3 − 0.2 − 0.8 = 2.3 million euros.