Adjusted EBITDA

Adjusted EBITDA, or normalised EBITDA, is what the business earns when it is run as a going concern. Typical add-backs are owner-manager pay above a market rate, personal costs put through the company, one-off restructuring or advisory fees, and related-party rents that are not at arm's length. Typical deductions are one-off income: a book gain on an asset sale, an insurance recovery, a provision released without a continuing reason. If it would not recur under a new owner, it comes out. The multiple is applied to this figure. See also Normalisation.

Example

Reported EBITDA of 0.8 million euros. Add-backs: owner-manager pay 0.15 million euros above market, one-off restructuring of 0.05 million euros. Deductions: a one-off book gain of 0.10 million euros on an asset sale. Adjusted EBITDA = 0.8 + 0.15 + 0.05 − 0.10 = 0.9 million euros.