What is an EBITDA adjustment in due diligence?

An EBITDA adjustment is a change to reported EBITDA that removes one-time, non-recurring, or owner-specific items, to show what a buyer can actually expect to earn after the transaction closes.

What gets adjusted most often?

Owner compensation, one-time legal or restructuring costs, non-recurring revenue, related-party transactions, and personal expenses charged to the company.

Who decides which adjustments to make?

The buyer's FDD team decides which adjustments are justified. The seller may propose adjustments in a VDD report, but the buyer has the final say.

Can EBITDA adjustments reduce the purchase price?

Yes. If adjustments reduce normalized EBITDA, the purchase price is typically renegotiated based on the adjusted EBITDA multiplied by the agreed EV/EBITDA multiple.

How long does the adjustment analysis take?

For most mid-market deals, 3-5 business days from data receipt. Complex cases with many related-party transactions may take longer.

EBITDA Adjustment Due Diligence: Normalizing Earnings for M&A

Why EBITDA needs adjustment

Reported EBITDA is the profit and loss statement prepared by the seller's accountant. It reflects what the company earned under the current ownership, with the current cost structure and the current accounting choices.

A buyer doesn't care about the seller's EBITDA. The buyer cares about what EBITDA will look like under their ownership — after the deal structure changes, after one-time items disappear, and after owner-specific costs are replaced with market-rate compensation.

EBITDA adjustments are the bridge between these two numbers. Getting them right determines the price. Getting them wrong means paying for earnings that don't exist.

The most common adjustments

Owner compensation

Founder or partner salaries above market rate are added back. The buyer will pay themselves a market salary, so above-market owner pay is not a sustainable cost.

One-time legal and restructuring costs

Litigation settlements, regulatory fines, restructuring charges, and non-recurring professional fees are typically removed — unless they signal a recurring problem.

Non-recurring revenue

Revenue from a one-off contract, a temporary government grant, or a fire-sale customer batch that won't repeat. Revenue adjustments are rarer than expense adjustments but often larger in absolute terms.

Related-party transactions

Rent, consulting fees, or management fees paid to entities owned by the same family. These need to be market-tested — or eliminated entirely.

Personal expenses

Cars, travel, or entertainment charged to the company but used personally. These are added back entirely — they are not business costs.

Accounting policy differences

Revenue recognition timing, depreciation methods, or inventory valuation that differ from market norms. Adjustments align the numbers with what a buyer would report.

The adjustments most likely to be challenged

Not every adjustment the seller proposes will survive buyer scrutiny. Three categories attract the most pushback:

Owner compensation: Buyers will cap adjustments at market rate. If the owner pays themselves $300K and the market rate is $150K, the adjustment is $150K — not $300K.
One-time items: If an item recurs across multiple years (even in different amounts), buyers will treat it as recurring. Show us two years of the same "one-time" cost and we'll question it.
Revenue add-backs: Revenue adjustments are harder to justify than expense adjustments. Buyers expect some revenue churn. Unless the revenue is clearly non-recurring (contract ended, grant expired), it stays.

How adjustments change the deal

Adjusted EBITDA × agreed multiple = adjusted enterprise value. If adjustments reduce EBITDA, the purchase price drops.

Reported EBITDA: $5M

At a 6× multiple = $30M enterprise value.

Adjustments: -$500K

After removing non-recurring items and normalizing owner pay.

Adjusted EBITDA: $4.5M

At the same 6× multiple = $27M enterprise value.

A $500K EBITDA adjustment at 6× is a $3M price difference. For larger businesses or higher multiples, the difference is larger still.

How we approach EBITDA adjustments in Nordic deals

Nordic targets report under K2, K3, IFRS, or NGAAP — depending on the country and listing status. Each has slightly different presentation norms, but the adjustment principles are universal.

Our approach:

Start from SIE/SAF-T source data. Every adjustment ties to a specific transaction in the ledger export.
Compare to industry norms. Owner compensation, working capital, and one-time items vary by sector. We benchmark against Nordic sector data.
Show the bridge. We present reported EBITDA, each adjustment with its source, and adjusted EBITDA — with full workings. No black boxes.
Flag judgment calls separately. Some adjustments are defensible but debatable. We call these out explicitly so the buyer can negotiate from an informed position.

Need an EBITDA normalization?

Send the data room index or a sample SIE/SAF-T export. We'll tell you within one business day what we can deliver.

Book a consult FDD services

Or email abhishek.bhandari@zionadvisor.com directly.