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Axial Radar: Justifying EBITDA Adjustments

Axial Radar

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Happy Friday and welcome to another edition of Axial Radar!

One of the primary objectives of the M&A due diligence process is establishing fair market value for the asset being traded. A natural point of contention between buyer and seller, multiple strategies can be used to help bridge the gap between a seller’s exit expectations and the business’ actual operating potential in any given year. One of those strategies is the somewhat infamous EBITDA adjustment process.

EBITDA adjustments are intended to reveal the true performance of a business, sans any unexpected, one-time, force majeure-type events… like a global pandemic. The tricky part of EBITDA adjustments, however, is toeing the line between defensible and unreasonable. Adding back too much can very quickly cause a deal to go off the rails while calling the seller’s credibility into question. Include too little, on the other hand, and the seller will likely leave chips on the table when all is said and done. In this week’s featured Industry Trends article, we explore trends in EBITDA adjustments and how sellers and their M&A advisors are thinking about the process in light of the pandemic and its impact on operating performance over the last 18 months.

Our featured buy-side members this week include a strategic PE firm with a buy and build approach, a 30 year old corporation in the contracting space, and a Nashville-based family office. On the sell-side we’ll introduce you to a leading M&A brokerage firm, and an M&A advisory firm led by a veteran finance professional with over 30 years experience.

Click here to follow Axial on LinkedIn and stay up to date on the latest trends in the world of Lower Middle Market deal making.


Axial

Featured Members

Warren Equity Partners

Warren Equity Partners
Private Equity Firm

Warren Equity Partners (“WEP”) is a private equity firm that invests in small and middle market operating companies primarily in North America. WEP invests in established companies where additional capital and operating resources can accelerate growth. The firm primarily targets products and services companies in the infrastructure, industrial, and building sectors.

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Raincatcher

Raincatcher
Business Broker

Raincatcher is an M&A brokerage firm that transforms small to medium-sized businesses into companies that are built to sell. Raincatcher is different compared to other business brokers, not only because they care, but because they promise to always take the time to listen and recommend what is best for the company – like it was their own.

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Power Tek Group

Power-Tek Group
Corporation

Founded in 1996, Power-Tek Group is an Ottawa-based integrated, multi-trade construction company with over 75 employees and four operating divisions: Electrical Contracting, General Contracting, HVAC and Refrigeration Contracting and Real Estate Acquisition and Development. Over its 24-year history, Power-Tek group has completed over $300M worth of construction projects throughout Eastern Ontario.

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Falcon Rock Associates

Falcon Rock Associates
M&A Advisory Firm

Falcon Rock Associates is a full service M&A Advisory firm, founded by veteran finance professional, Joe Falkenstein. Mr. Falkenstein has spent over 30 years investing in and supporting Entrepreneurs in a variety of capacities and companies, includes Big 4 accounting and consulting, venture capital investing, private equity, and operations, as a sitting CFO and COO.​​​

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Snell Ventures

Snell Ventures
Family Office

Snell Ventures is a faith-focused family office based in Nashville, TN. The firm acquires great family businesses and works to preserve them for the next generation of job seekers. Snell Ventures is primarily focused on manufacturing, materials, and industrial firms.

View Profile

Not an Axial Member yet?

This week from
Middle Market Review

Riding the eCommerce M&A Wave
​​​​​Read More

Axial’s LMM Deal Digest: July 2021 Edition
​​Read More

Martin Ice Cream and the Sale of Personal Goodwill
Read More

Q2 2021 Behavioral Health M&A Update
​​​​​​Read More

Industry Trends

EBITDA Adjustments: A Market Update

While valuations remain high, EBITDA adjustments climb higher.

Source: Zachary Scott & Co.

Get in Touch

Reach out to dani.forman@axial.net to learn more

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