Best of: Egregious EBITDA addbacks
Is that really non-operational?
Would love to see some heinous addbacks anyone’s seen in this fine line of work
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Not sure if its a 'add-back' but have seen a PF adjustment for acquisitions that will happen in the next 24 months as an adjustment.
To be clear, these weren't deals signed or close to beign done, its a weighted probability based on some B/S pipeline management/PE fund created
2030E PF EBITDA, adjusted for optimism
Wouldn't this be fair for a serial acquirer, roll-up, etc? Genuinely asking don't really know either way am a student.
In competitive processes especially for deals that are already signed or well into integration buyers will sometimes pay up for potential revenue or cost synergies (with cost synergies being far more credible), particularly if the platform is attractive and you’re trying to win the bid. That said, it’s rare for anyone to give explicit credit for operating in a “fragmented market.”
To put it more clearly, most PE assets are ultimately valued on a simple framework: purchase price = EBITDA × multiple (setting aside software and some or Apollo-style situations). A fragmented market can absolutely be an investment positive and may justify a higher multiple, but it almost never flows through to EBITDA at entry.
At the end of the day, sellers/sell-side bank don’t really care how you triangulate to the purchase price. Internally, though when you’re in front of IC you might be able to argue for a higher multiple based on market structure and consolidation dynamics. What you won’t get away with is inflating EBITDA with some BS adjustment which you'll get laughed at
Not sure if anything will ever top WeWork's community adjusted EBITDA.
Best one I saw in growth investing -- company's definition of ARR was "annualized monthly cash inflows" for a consumer subscription business. But 10% of people prepaid annually, and 80% cancelled for a full refund within the month... so the company's actual ARR was like 15% of what they claimed.
Believe it or not, it was most likely negligence... the tech/product-oriented founder was SHOCKED by this finding. When we asked "did you ever wonder why the company is incinerating cash when you supposedly have $30M of ARR against a $5M expense base" it finally clicked.
Feel that lol. Was crazy when I had to explain what cohortized retention is to a founder when he was arguing against me on his retention profile.
Was covering a company a while back that reported Adjusted EBITDA of something like $100 million on their earnings and then noted that adjusted for other items not in Adjusted EBITDA, the number would have been $130 million....
So basically, they were reporting Adjusted Adjusted EBITDA.
Not surprsingly, the company went BK.
Sometimes the adjustments need adjusting
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