Value Creation Bridge 1704547119
Value Creation Bridge 1704547119
Value Creation Bridge 1704547119
𝐸𝑉/𝐸𝐵𝐼𝑇𝐷𝐴 ∗𝑀 ∗∆ 𝐷 − 𝐶𝑎𝑠ℎ − 𝐷
𝐸𝑉/𝐸𝐵𝐼𝑇𝐷𝐴 ∗ 𝑆𝑎𝑙𝑒𝑠 ∗∆
𝐸𝑉/𝐸𝐵𝐼𝑇𝐷𝐴 ∗𝑀 ∗∆
Bridge Method 2: Equity return from MOIC
Unlevered MOIC
Organic Sales growth
Unlevered MOIC EBITDA margin growth
Organic Sales growth Cash Conversion growth
EBITDA margin growth EV/EBITDA multiple
expansion Levered MOIC
Constant Cash Conversion
With Add On
Constant EV/EBITDA multiple
Levered MOIC
Unlevered MOIC Without any Add On
Organic Sales growth
EBITDA margin growth
Cash Conversion growth
Unlevered MOIC Constant EV/EBITDA multiple
Organic Sales growth
Constant EBITDA margin
Constant Cash Conversion
Constant EV/EBITDA multiple
Conclusion: Beware about bridges
• Here my point of view:
A bridge is NOT unique there are a LOT of ways to decompose equity return
Value creation is RELATIVE: if your sales grew by 5% while the average sector grew by 8% did
you really created value?
Value creation but to WHO? An equity bridge is only “return to the PE fund”. What about
value creation to customers? To suppliers? To employees?