Depreciation added to business valuations inflate the price and can make or break a deal.
For example: Equipment that was purchased for $700K, 7 years ago has been depreciated $100k over 7 years and the business has received tax credits for each of those years.
When the business is valued using EBITDA, in this case as an example 4 x EBITDA, the assumption is that the buyer will pay x 4 the price of the equipment, ($700K x 4). Not only is the equipment not worth x 4 what the owner paid but it in fact has lost value from the original $700K they paid.
Depreciation is not a cashflowing item. Capex is an expense and not an addback used to value a business.
What have your experiences been explaining this to over zealous brokers and owners during negotiations?