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Normalisation
Normalisation takes one-off items, and any income or cost that is not ordinary trading, out of the profit and loss.
The question is what a new owner would keep if they ran the firm as a going concern. Anything that would not continue comes out. Typical items: owner-manager pay above a market rate, personal costs put through the company, one-off restructuring or advisory fees, a book gain on an asset sale, pandemic support, a provision released without a continuing reason. What remains is normalised EBITDA; see Adjusted EBITDA. Diligence will test every material line.
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