Worked example
Translate a partial equity purchase into an implied value
A fictional proportional calculation separates cash paid for a stake from the value implied for retained shares.
HypotheticalFictional Acquisition Companion example
This hypothetical uses invented facts and numbers. A buyer pays £960,000 for 60% of a fictional company’s equity. For this simple calculation, assume the shares have identical economic rights and the price scales proportionally across the equity.
Derive the implied equity value
- Implied value of all equity: £960,000 ÷ 60% = £1,600,000.
- Implied value of the retained 40%: £1,600,000 × 40% = £640,000.
The £640,000 is a proportional implication of the assumed price. It is not cash paid to the seller, a guaranteed future payment or a separate valuation opinion. Different share rights, debt, transaction adjustments, dilution or control terms could change the economics.
Separate retained ownership from deferred cash
Rollover equity leaves the seller exposed to the future value of the business and to the rights attached to the retained shares. A fixed deferred payment is a contractual claim with different risks. Before using either structure, specify the entity, security rights, governance, future funding and any later purchase mechanism. Continue with rollover equity and equity value.
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