Factoring Fees EBITDA adjustment?

by a searcher from Georgetown University

5 months ago

Hey! I'm looking at a deal where the seller is attempting to use "Factoring Fees" as an adjustment to EBITDA.  This doesn't seem appropriate to me, because they spent money to turn some of their A/R into cash...and they did it two years in a row.  Any thoughts on this?

1 like
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21 comments

searcher from Northwestern University - Kellogg School of Management

Idk if anyone mentioned this, but one way to look at this is: If they want to add back the facoring fees, then you make a deduction for operational cash in the equity bridge...

4 months ago | like reply | 0 likes

professional from Bishop's University

It's the very same thing as adding back interest costs to achieve EBITDA. It's a cost of capital expressed in a different way. When you look at the deal, make sure you factor in all the operating capital you'll need and the cost/Rate of return you'll need on same. cheers.

4 months ago | like reply | 2 likes

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