Debt-Free, Cash-Free (DFCF)

Definition

The DFCF basis decouples the price from the incidental balance-sheet position at closing. Buyer and seller agree an enterprise value; that is then converted to the price for the shares via the "equity bridge" by subtracting net debt and adjusting for working capital versus the peg.

The benefit is comparability and fairness: two bids on a DFCF basis are directly comparable regardless of how each business is financed. The debate shifts to what exactly counts as "debt-like" (e.g. deferred taxes, leases, staff earn-outs) and what counts as surplus cash.

When it matters

Almost every Belgian and Dutch share deal is negotiated on a DFCF basis. Failing to pin down the definition of debt and cash can cost tens of thousands of euros in the closing statement: the detail lives in the SPA, not the headline.

Frequently asked

What counts as "debt" in a DFCF deal?

Bank loans and financial debt certainly; also often debt-like items such as lease obligations, overdue taxes, unfunded pensions and deferred compensation. The exact list is negotiated in the SPA.

Does the seller really keep all the cash?

Operating cash needed to keep the business running stays in (usually via the working-capital peg); only surplus cash goes to the seller or increases the price.

How does it differ from a locked-box?

DFCF describes the price basis (EV, free of debt/cash); locked-box and completion accounts are the two mechanisms that fix that basis to a date. A locked-box freezes the balance sheet at an earlier date; completion accounts settle at closing.