A £2 million offer can sound straightforward until the buyer explains what the figure includes. Before comparing offers, establish whether the headline is the value of the operating business, the value of the shares or the cash payable to the seller at completion.
Scope: commercial planning for a UK private-company share sale. The example uses pounds and is illustrative, not a valuation or tax calculation. Sources checked on 2 October 2026.
Quick answer: three numbers to separate
| Number | What it means | What can change it |
|---|---|---|
| Enterprise value | The headline value assigned to the operating business before the agreed bridge to the shares. | The valuation basis, performance assumptions and deal definitions agreed by the parties. |
| Equity value | The value of the shares after the agreed enterprise-to-equity adjustments. | Cash, debt, working-capital and other transaction adjustments defined in the deal. |
| Cash at completion | The amount payable to the seller at completion, before seller-specific fees and tax. | Retentions, escrow, deferred consideration, earn-outs and other payment conditions. |
If a buyer says “£2 million”, ask which of these numbers they mean and request a written bridge. The difference affects how much is payable, when it may be received and how certain it is. KBA’s free business-sale value bridge can help you organise the first comparison; transaction terms still need professional review.
Define the value before discussing the multiple
Enterprise value describes the operating business before the agreed adjustments for its financing and balance-sheet position. In a typical cash-free, debt-free transaction, cash, debt and the difference from an agreed normal level of working capital form a bridge to equity value. The deal definitions determine the adjustments. ICAEW: Completion mechanisms, section 1 (PDF).
For a first discussion, ask the buyer to explain the headline in one sentence: what is being bought, on what balance-sheet assumptions and at what date? That answer gives your adviser a clear starting point for checking the arithmetic.
Worked example: from £2 million to the value of the shares
Assume a buyer offers £2,000,000 enterprise value for all ordinary shares. For this example only, the parties agree to add £120,000 of qualifying cash, deduct £400,000 of bank debt, and deduct any shortfall against a £250,000 working-capital target. Delivered working capital is £220,000. There are no other adjustments.
Working-capital shortfall: £220,000 delivered less £250,000 required = £30,000 below target.
Illustrative equity value: £2,000,000 + £120,000 − £400,000 − £30,000 = £1,690,000.
Now change just one assumption. If the delivered working capital were £270,000 and the agreement credited the £20,000 excess, equity value would be £1,740,000. The £50,000 movement comes from the balance-sheet adjustment; the headline enterprise value remains £2,000,000.
This is arithmetic under invented deal terms. It does not establish what any particular business is worth or what adjustments a buyer must accept.
Completion accounts or locked box: when is the price fixed?
The bridge also needs a measurement date and a price-setting process. In a completion-accounts deal, the amount paid at completion may use estimated balances; accounts prepared afterwards establish the agreed completion-date figures and the resulting price adjustment. A locked-box deal instead uses an earlier balance sheet to fix the equity price, generally without a later cash, debt and working-capital true-up. The contract controls the mechanism; neither label makes every payment unconditional.
ICAEW’s Completion mechanisms guidance, section 2 (PDF) explains both approaches. A locked box still needs provisions addressing value transferred to the seller or connected persons after the reference date (“leakage”), any expressly permitted payments and any agreed value accrual. It is not a reason to ignore what happens between that date and completion.
A practical record to prepare before comparing offers: write down the mechanism, reference accounts and date, agreed cash/debt/working-capital definitions, and whether each figure is estimated, proposed or agreed. For completion accounts, record who prepares and reviews them, the deadlines and the contractual process for disagreements. For a locked box, ask the advisers to identify the permitted-leakage schedule and any value-accrual calculation. Leave unresolved terms visibly unresolved.
BDO’s explanation of completion accounts highlights the importance of clear accounting policies, reference accounts and information cut-off dates. Ask the financial and legal advisers to check these together rather than assuming ordinary year-end accounting automatically supplies the contractual answer.
Illustrative extension of the example above, not client work: assume £1,690,000 was paid using estimates under a completion-accounts agreement. The only subsequent agreed change is that qualifying cash was £15,000 lower. With all other terms unchanged, the revised equity value is £1,675,000. The agreement determines how and when the £15,000 difference is settled. Do not apply that same automatic adjustment to a locked-box offer without checking its terms.
When using KBA’s free business-sale value bridge, keep a separate dated assumptions note alongside the arithmetic. If the mechanism or reference date is still unknown, mark the comparison provisional. Include those two points in your valuation consultation enquiry; arrange secure sharing of the agreement separately.
This section concerns UK private-company share-sale preparation; sources checked 19 October 2026. It does not select a mechanism for your transaction or calculate tax.
Equity value and immediate cash are still different
Continue the first illustration. Suppose £150,000 of the £1,690,000 consideration is held back under the agreement, with the rest paid at completion. Immediate cash would be £1,540,000 before the seller’s fees and taxes. The retained amount is not being deducted again in the valuation bridge; it changes when and on what conditions the seller receives it.
For your own offer comparison, show three separate amounts: the agreed value of the shares, cash due at completion, and amounts payable later or subject to conditions. Avoid presenting uncertain future payments as money already available.
Compare offers by certainty and timing, not only the headline
Two offers with similar headline values can create very different outcomes. Break each offer into cash at completion, fixed deferred consideration, retained or escrowed amounts, contingent payments such as an earn-out, and any non-cash consideration. Then record the conditions, payment date and evidence used for each amount.
Illustrative comparison. Offer A is £1,850,000 in cash at completion. Offer B is £1,700,000 at completion, £200,000 fixed after 12 months and up to £250,000 under an earn-out. Offer B has a maximum headline amount of £2,150,000. If the earn-out ultimately pays £100,000, the amounts in this example total £2,000,000, but only £1,700,000 is available at completion. The maximum should not be treated as guaranteed cash.
The comparison is illustrative and ignores fees, tax, financing costs and the time value of money. Legal and tax advisers should review the agreement and the seller’s circumstances before decisions are made.
Build a one-page offer comparison
- Valuation basis: enterprise value or equity value, and the cash, debt and working-capital assumptions.
- Cash at completion: the amount and expected payment date, shown before fees and tax.
- Fixed amounts payable later: due dates, conditions and any security arrangements for advisers to examine.
- Retentions or escrow: release dates, claim conditions and the evidence needed for release.
- Earn-out or other contingent value: the metric, measurement period, reporting source and a downside, base and maximum scenario.
- Non-cash consideration: what is being received, when it may become liquid and which valuation assumptions are being used.
- Unresolved items: owner, deadline and the financial, legal or tax adviser who needs to answer each question.
This format does not decide which offer is best. It makes the trade-off between value, timing and uncertainty visible before the financial and legal terms are finalised.
Prepare a deal-adjustment worksheet
Start with evidence. Reconcile the cash figure to bank records. Bring debt statements and a schedule of interest, repayment terms and any proposed settlement amounts.
Show working capital over time. Put monthly customer balances, stock and supplier balances beside the proposed target. Explain unusual months rather than selecting a single date because it produces a favourable answer.
Keep one classification per item. Create columns for the proposed treatment, supporting record, buyer’s view and unresolved question. This makes it easier to spot an amount appearing in both debt and working capital.
Separate certainty from timing. Mark which amounts are payable immediately, retained, deferred or contingent. Ask the transaction advisers to explain the contractual conditions and consequences.
Connect valuation with preparation
KBA provides business valuation and financial due diligence. Bring the proposed offer, recent accounts, monthly management figures and ownership details so the financial questions can be scoped. A financial model can then show the effect of alternative assumptions. You can also download KBA’s editable business-sale value bridge. Use our business valuation information checklist to organise the records for a sale or ownership discussion, then request a consultation.