EDITDA vs EBIT for valuation purposes

by a searcher from Columbia University

2 years ago

I'm looking at a deal for which depreciation and capex are material each year, and want to exclude them from the valuation calculation. I believe my seller expects to use an EBITDA multiple for his business, and is waving his hand at his annual capex. Have you guys seen structures or discussion patterns that have successfully climbed over this bump? For context, depreciation is nearly half of EBITDA each year.

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25 comments

searcher from University of Oxford

Ultimately the multiple should be adjusted based on the metric used for a given valuation

4 months ago | like reply | 0 likes

searcher from North Carolina State University

I would valuate certain businesses on EBIT vs. EBITDA when the EBITDA numbers are mainly driven by depreciation like equipment leasing businesses. Also be aware that some brokers are pushing business valuation of SDE as if its EBITDA when manipulating EBITDA values to addback personal exps. Usually SDE x is much lower than EBITDA x.

8 months ago | like reply | 0 likes

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