Net financial debt

Net financial debt (dette financière nette — DFN) is the difference between all interest-bearing financial obligations (bank debt, bonds, finance leases, shareholder loans) and available net cash (cash, bank balances, short-term liquid investments). It is the central bridge between enterprise value and equity value in M&A transactions. Its precise definition — which items are included or excluded — is one of the most negotiated points in SPAs, particularly for IFRS 16 leases, pension deficits, earn-out liabilities and off-balance-sheet contingencies. Treatment of pension obligations, provisions, hedging instruments, lease liabilities and factoring can each shift the price on a franc-for-franc basis. Debt-like items and trapped cash are typically listed in a dedicated schedule agreed between the parties, supported by the financial due diligence findings. Locked-box deals fix these items at the reference date, shifting scrutiny to leakage.

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Example: a Swiss company is acquired at CHF 22.0 million enterprise value. Net financial debt at closing: bank debt CHF 6.5 million + IFRS 16 leases CHF 1.2 million + shareholder loans CHF 800,000 - cash CHF 1.8 million = CHF 6.7 million. Equity value paid to shareholders = CHF 22.0 - 6.7 = CHF 15.3 million — the actual proceeds received by the sellers.

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Hectelion builds precise net financial debt bridges in every transaction, documenting each item to prevent post-closing disputes on the actual equity price paid.