Weighted EBITDA average calculation

by a searcher

2 years ago

I have a deal I am working on where there EBITDA in 2018, 2019 and 2020 was $1M and the EBITDA in 2022 is $1.7M. 
Could someone please offer their advice on how to approach the EBITDA calculation?

Is there a way that I can give more weight to the 2022 numbers but also take into consideration of the average of the previous years?

Any suggestions would be very much appreciated. Thank you in advance.

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professional from University of Southern California - Marshall School of Business

Warren Buffett says, “People who use EBITDA are either trying to con you or they’re conning themselves.” Charlie Munger, Buffett’s right-hand man, goes even further: “I think that, every time you see the word EBITDA, you should substitute the word ‘bullshit’" Strong words from some of the most successful businessmen on the planet.

1 year ago | like reply | 0 likes

intermediary from The University of Chicago - Booth School of Business

If the numbers were reversed (.e. declining from $1.7 to $1), will you be willing to pay based on avaerage? I am guessing, No. Similarly, the seller will be reluctuant to average last 3 years when things are going up. The answer lies in understaning the growth and then your assesment of what it will be under you.

2 years ago | like reply | 1 like

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