A deal I'm looking at is for a company that relies heavily on paying certain lead generation players to acquire new customers. Using fictional numbers, let's assume they generate about $50 million inbut they pay $30mm year in referral fees to these lead generators annually.. and in turn try to convert those leads into customers. Though the avg customer lifespan is around ~1 year, this company amortizes a portion of the $30mm in referral fees over a 3 year period, which overstates EBITDA..
Should I be backing out the ~$30mm in fees that were paid to get to an Adj. EBITDA figure of $20 million instead of the $50 million? My thought being these are routinely occurring expenses necessary to run the business.