When selling a company, it is not enough to have an EBITDA figure in the income statement. The buyer will check how the result was arrived at, whether it is recurring and whether the adjustments presented can be substantiated.
Normalisation may take into account one-off costs or owner-related expenses that differ from normal practice. At the same time, you need to assess whether replacement management, necessary investments and other fixed costs are adequately reflected in the forecast. Each adjustment should be backed by a calculation and a supporting document.
If adjusted EBITDA is poorly substantiated, the buyer may lower the earnings figure used in the valuation or offer part of the price as a contingent payment. That is why the quality of earnings is worth working through before the sale process, together with the treatment of working capital and net debt.
WIZEN helps prepare normalised EBITDA analysis and get financial information ready for the buyer’s review.