EBITDA Bridge

Normalised EBITDA (often used interchangeably with adjusted EBITDA, though adjusted EBITDA usually means a company's own measure of what it excludes) is a company's earnings before interest, tax, depreciation and amortisation, restated to show the sustainable earning power a buyer would inherit. The reported figure is adjusted to remove one-off items, owner-specific costs and non-market arrangements — an owner's salary above or below the market rate, personal expenses run through the business, exceptional legal costs, or the effect of a related-party contract — and to add back or strip out anything that will not recur under new ownership.

The International Private Equity and Venture Capital Valuation Guidelines (IPEV Guidelines) are best-practice recommendations, published by the IPEV Board, for measuring the Fair Value of private equity and venture capital investments consistently with IFRS 13 and ASC 820. They apply at investment level: a fund's Valuer uses them to value the fund's holding in each portfolio company at every measurement date — typically quarterly — with one or more of five techniques (multiples, industry valuation benchmarks, available market prices, discounted cash flows and net assets), calibrated to the price of a recent orderly investment.

An intangible investment — R&D, brand-build, customer-acquisition with measurable payback, software development — that has been moved from operating expense to balance-sheet asset and amortised over its useful life under management accounting. Statutory accounting rarely permits the same treatment for internally-generated intangibles: IAS 38 imposes six conservatism criteria that are difficult to meet in practice; ASC 730 forces immediate expensing under US GAAP.

A founder-side preparation discipline that builds the evidence base a Fund's Fair Value process needs at every measurement date — before the term sheet conversation begins. Distinct from valuation negotiation: a Fair Value defence isn't about arguing for a higher number, it's about producing the inputs the Fund's quarterly Fair Value model will consume for the duration of the investment.

The number of months a company takes to recover its customer acquisition cost from gross profit on the cohort acquired. Calculated as CAC ÷ (monthly gross profit per customer).

The IPEV discipline that gives a Fair Value model its memory. Entry inputs (the most recent funding round price, comparable transactions, noted multiples, identified intangible assets) become reference points; deltas are tracked at every measurement date.

The IPEV evidence standard, set out in the commentary under paragraph 2.5 of the Guidelines: information that is known or knowable as of the measurement date is in scope at every quarterly Fair Value remark, whether the founder surfaced it or not. The Guidelines define it as facts, conditions or observable information that exist at the measurement date and are available to the valuer, or would reasonably be available through routine inquiry or due diligence; information that becomes known, or events that occur, after the measurement date are subsequent events and are not known or knowable at that date.

The documented record that establishes an intangible asset exists, where it sits in the Opagio 12 framework, what it is worth, and how that value can be defended at a measurement date. Evidence comes in four forms: identification (the asset is named and classified), provenance (the source documents are attached), measurement (a valuation method has been applied with documented inputs), and persistence (the evidence is reviewed and updated on a defined cadence).

How do I prepare my business for sale?

Get the numbers clean and normalised, tidy contracts and intellectual property, reduce founder dependency, and prepare a vendor due diligence pack and data room — all framed around what a buyer's diligence will test.

What is my business worth to a buyer?

A buyer applies a multiple to your normalised earnings and sets that multiple on the quality of your intangible assets — brand, customers, technology, processes and people — not on last year's profit alone.

How do I value a business I want to buy?

Apply a multiple to the target's normalised earnings, then test whether the intangible assets behind those earnings — customers, technology, brand, people — justify it and will transfer to you.