EVERYTHING YOU NEED TO KNOW ABOUT ADJUSTED EBITDA
Our team is constantly working with and on behalf of buyers and sellers of privately owned Canadian businesses. We’re often presented with or trying to better understand adjusted EBITDA figures. It’s always a back-and-forth with a seller and buyer to agree on what really constitutes an acceptable adjustment.
Adjusted EBITDA (earnings before interest, taxes, amortization, and depreciation) is a financial metric used to measure a company's cash earnings. It is calculated by taking a company's EBITDA and making further adjustments for expenses or revenues that are not considered "core" or essential to the company's operations. These adjustments may include one-off events, personal expenses, above market compensation, benefits, perks and intercompany transactions.
When negotiating the sale of a business, buyers and sellers often disagree on what constitutes an acceptable adjustment to EBITDA. As a buyer, it is important to carefully evaluate whether any proposed adjustments are truly non-core or non-recurring to the business being purchased. As a seller, it is important to accurately identify and include the most relevant adjustments to improve the EBITDA. Operational decisions, such as whether to buy or lease equipment, can also impact the EBITDA.
If you have questions about EBITDA adjustments for your business, it is always a good idea to seek expert guidance. Our team has access to valuable resources to help you understand and navigate this metric.
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ABOUT THE SHAUGHNESSY GROUP
Established in 2017, the Shaughnessy Group helps business owners sell or divest their lower middle-market, privately held businesses. In addition to this, the Shaughnessy Group also assists clients in growing their businesses through acquisitions and securing debt funding for those acquisitions. With a focus on providing expert guidance and support, the Shaughnessy Group helps business owners navigate the complexities of selling or acquiring a business. To learn more, visit www.shaughnessy.group.
ABOUT THE AUTHOR
Karl Sigerist is a business advisor who helps shareholders, board members, owners, entrepreneurs, and executives navigate issues related to governance, strategic planning, and corporate finance throughout the life cycle of their business. He has experience in starting up eight organizations in the public and private sectors, as well as leading three turnarounds of Canadian and European private and public organizations. Karl has successfully led the growth of several business-to-business technology, specialty finance, warranty, and creditor insurance companies through mergers, acquisitions, strategic alliances, and capital raises, resulting in the development of leading national brands and platforms. He has also fostered cultures and teams that have achieved Growth 500 status for five consecutive years and been recognized as a Top 100 Small & Medium Enterprise Employer for two consecutive years. In addition to his professional work, Karl serves as a mentor to business school students and newly immigrated Canadians, and volunteers on not-for-profit boards. You can find out more about Karl on his LinkedIn profile at https://www.linkedin.com/in/karlsigeristjr/.
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