Why adjust
A multiple applies to recurring, market-based and normal EBITDA. Anything that isn't must come out before discussing price.
The five key adjustments
| Adjustment | Direction | Question to ask |
|---|---|---|
| Non-recurring costs | + | Will they come back in another form? |
| Intragroup revenue | - | Is the transfer price a market price? |
| Owner compensation | + / - | What would a salaried CEO cost? |
| IFRS 16 rents | - | Are we comparing multiples with or without leases? |
| Cut-off effects | + / - | Does December look like January? |
The intragroup revenue trap
Revenue billed to sister companies depends on group policy, not on the market. After the sale it can disappear or be renegotiated. I adjust it by the margin it carries and flag it as a continuity risk.
From EBITDA to equity value
Net debt doesn't stop at the balance sheet: overdue tax and social liabilities, deconsolidated factoring, earn-outs, litigation provisions. Anything paid in cash before the buyer comes off the price.
The Deal Desk "Diligence" module lets you test these adjustments live.