Value creation bridge
The decomposition of an equity gain into its levers. Also called the value bridge.
Value creation bridge in round numbers
Hypothetical, common monetary units: entry earnings before interest, taxes, depreciation and amortization (EBITDA) is 10 at a 10x multiple, so enterprise value is 100. Exit EBITDA is 12 at 12.5x, so enterprise value is 150. Net debt falls from 60 to 40; equity therefore rises from 40 to 110, a gain of 70. Assume no distributions, additional equity, fees or taxes.
This ordering allocates the growth/multiple interaction to multiple change. Revenue and margin contributions need a further EBITDA bridge.
Scroll horizontally to read all columns.
| Component | Equity-value effect |
|---|---|
| Starting equity | 40 |
| EBITDA growth: (12 − 10) × 10 | +20 |
| Multiple change: 12 × (12.5 − 10) | +30 |
| Net-debt reduction: 60 − 40 | +20 |
| Ending equity | 110 |
Terms Related to Value creation bridge
MOIC · Multiple · Value creation plan · EBITDA bridge · Multiple arbitrage · Top-down / bottom-up · All of the glossary