EBITDA and Valuation: Why a Deep Analysis Can Change Your Company’s Value

Admin
Aug 15
3 min read

EBITDA and Valuation: Why a Deep Analysis Can Change Your Company’s Value

Introduction

Receiving a purchase offer based on EBITDA multiples may seem straightforward and simple. After all, it appears to be just a matter of multiplying operational profit by a market factor — and the value is set. In practice, however, this approach can lead to misguided decisions and even million-dollar losses, especially when the full business context is not considered.

Companies in the same sector, with similar revenues and margins, can end up with drastically different valuations. This is because EBITDA, while a key metric, is only the starting point for a value analysis. Adjustments, projections, risks, and operational specifics must be factored in for the final figure to truly reflect reality.

In this article, we’ll explain the main variables that influence an EBITDA multiple-based analysis and why working with specialized consulting ensures a fairer, more transparent, and more profitable negotiation.

1. EBITDA Adjustments: Not All Operational Profit Is the Same

“Pure” EBITDA often contains distortions that must be corrected before applying any multiple. Key adjustments include:

Non-recurring expenses: Costs that are not part of routine operations and should not affect future value.
Extraordinary income: One-off gains that will not repeat and would artificially inflate results.
Owner’s compensation: When above or below market value, it can distort margins.

A valuation consultancy performs an adjusted EBITDA calculation, isolating the real operational performance to ensure that the value calculation is solid and reliable.

2. Market Multiples: The Same Factor Doesn’t Always Apply

The EBITDA multiple is not fixed — it varies by sector, company size, growth outlook, and even the economic climate. Using a generic multiple may overestimate or underestimate real value.

In addition, recent transactions in the sector should be analyzed to identify multiples applied to comparable companies, with adjustments for operational and strategic differences. A company with a strong brand, recurring clients, and long-term contracts will generally be worth more than another with unstable revenues, even if both have the same EBITDA.

3. Operational Structure and Management: Direct Impact on Value

Valuation must consider whether the company depends heavily on its current owner or has a structured management team and clear processes. Businesses that operate independently of the owner tend to command higher multiples, as they pose a lower continuity risk for buyers.

Another key factor is operational efficiency: clinics or companies capable of growing with their current structure, without requiring major additional investments, tend to be more attractive and receive higher multiples.

4. Growth Prospects and Risks

A high EBITDA today does not guarantee the same performance in the future. Valuation should include an analysis of:

Market trends and regulatory changes.
Potential for geographic or service expansion.
Risks of losing key clients or important contracts.

Buyers are willing to pay more for businesses with a clear growth pipeline and a well-structured risk management plan.

Conclusion

Accepting or rejecting an offer based solely on EBITDA multiples without a detailed analysis can be a costly mistake. Every variable — from EBITDA adjustments to market context and management structure — can significantly change the final value.

Our consultancy specializes in deep, customized valuation, ensuring you have all the information and arguments needed to negotiate safely and advantageously. Before closing any deal, make sure the value presented truly reflects your business’s potential and reality.