What is EBITDA and why does it matter for valuation?
Short Answer
EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) strips out financing and accounting decisions to show a company's core operational profitability — it's the most common valuation metric in M&A.
Full Explanation
EBITDA has become the standard profitability metric for business valuation because it removes the effects of capital structure (interest), tax jurisdiction, and non-cash accounting charges (depreciation and amortisation). This makes it easier to compare companies across different ownership structures and geographies. In M&A, enterprise value is typically expressed as a multiple of EBITDA — a company with £2M EBITDA trading at 8x would have an implied enterprise value of £16M. Adjusted EBITDA goes further by removing one-off items like restructuring costs, founder salaries above market rate, and share-based compensation. For companies with significant intangible assets, the EBITDA multiple is often higher because the intangibles generate recurring, defensible revenue streams. Opagio's Productivity Calculator decomposes your EBITDA growth into its component drivers, showing how much comes from operational leverage versus intangible asset productivity.
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