Valuation terms

Normalization aims to establish a clear view of ongoing earning power. Income and expenses are reviewed to assess whether they are representative of future operations. Examples include nonrecurring advisory costs, gains on asset sales, and compensation that differs from market rates.

Each adjustment needs a clear rationale and supporting evidence. Describing an expense as exceptional is not enough. The resulting Adjusted EBITDA may be used in the valuation. Buyers typically examine these adjustments during due diligence.