Adjusted EBITDA
Adjusted EBITDA is reported EBITDA after one-off items, and any income or cost that is not ordinary trading, have been taken out.
Glossary
Business valuation terms
The figures behind an indicative valuation, each explained in a few sentences and grounded in publicly available sources.
Asset Deal
In an asset deal the buyer takes individual assets and contracts, not the shares.
Due Diligence
Due diligence is the buyer's structured review of the company, done before a contract is signed.
Earnout
An earnout is the part of the purchase price that is paid later, if agreed earnings or revenue targets are met after closing.
EBITDA
EBITDA is operating profit before interest, tax, depreciation and amortisation. Multiples are applied to it.
EBITDA Margin
EBITDA margin is EBITDA divided by revenue. It is operating profitability, in percent.
EBITDA multiple
An EBITDA multiple is the factor applied to a company's EBITDA to reach an indicative enterprise value. At a multiple of 6 and EBITDA of 2 million euros, enterprise value is 12 million euros.
Enterprise Value
Enterprise value is what the operating business is worth, before debt and cash. Multiples attach to this figure.
Equity Value
Equity value is what a seller receives for the shares: enterprise value minus net debt.
IFRS vs HGB
IFRS and HGB are different accounting standards. IFRS is the international set, closer to market values. HGB is German commercial law, built on prudence and creditor protection.
Letter of Intent
A letter of intent is the buyer's written statement of interest, with an indicative purchase-price range and the main terms of the intended deal.
Majority Stake
A majority stake is more than 50 percent of the shares. It gives the buyer control of the company.
Mid-Market
The mid-market is the deal segment for mid-sized companies. In the DACH region that typically means enterprise values of 5 to 250 million euros.
Mittelstand
Mittelstand, as the word is used in DACH, is the owner-managed firm, often a family firm. Size is not the test. Who owns it and who runs it is.
Multiple
A multiple converts an earnings figure, usually EBITDA or revenue, into enterprise value.
Multiples Method
The multiples method arrives at enterprise value by applying a market factor, usually to EBITDA.
Net Debt
Net debt is interest-bearing debt minus cash. It is the main item in the walk from enterprise value to equity value.
Normalisation
Normalisation takes one-off items, and any income or cost that is not ordinary trading, out of the profit and loss.
Owner Dependence
Owner dependence is how far revenue, customer relationships and day-to-day control sit with the owner personally.
Pension Provision
Pension provisions are balance-sheet liabilities for occupational pensions promised to current and former staff, and to managing directors.
Recurring Revenue
Recurring revenue is income that a contract, or the way the business is built, makes likely to come back each period.
Share Deal
In a share deal the buyer acquires the shares in the company, not the individual assets.
Succession
Succession is the transfer of leadership and ownership to the next generation, to the managers (an MBO), or to an outside buyer.
Valuation Range
The valuation range is the low, mid and high enterprise value for a sub-segment and a size class. It is indicative.
Valuation Reference Date
The valuation date is the day the figures speak to. Balance-sheet items, net debt and working capital are cut off then.
Working Capital
Working capital is the capital tied up in operations: inventory and receivables, less trade payables.