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Anonym A
am 5. Juni 2025
DACH
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EV-Equity Bridge Calculation

Isn’t there a case of double counting regarding the convertible? If the convertible is not in the money, we treat it as a debt-like item and deduct the amount accordingly. However, since the convertible is in the money in this case, we do not make that deduction—meaning equity is already higher by the amount of the avoided deduction. Adding an additional equity amount on top of this would, in my view, result in double counting.

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Gauri
Coach
am 6. Juni 2025
6+ years in M&A, Investment Banking, Corporate Development | KPMG & EY M&A | 8+ years Mentoring & Coaching

When a convertible bond is not in the money, it's unlikely the bondholders will convert to equity, so we treat the convertible as a debt-like item. So we deduct its value from Enterprise Value to arrive at Equity Value, because Enterprise Value typically includes all sources of capital (debt and equity), and we're isolating just the equity portion.

If the convertible is in the money, it is highly probable that bondholders will convert their debt into equity. We stop considering it as a debt-like item and also do not add its value to the Equity Value. Instead, we typically account for the dilutive effect of the potential conversion. This means we'd consider the increased number of shares outstanding if conversion were to occur, which would then be reflected in a higher share count for calculating diluted equity value, rather than adding a separate monetary amount in the Equity Value.

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