How to identify, validate and present one-off EBITDA adjustments in Transaction Services: criteria for a valid add-back, examples and interview approach.
One-off items are the most common type of EBITDA adjustment in Financial Due Diligence — and the most frequently mishandled by interview candidates. Here's how to think about them rigorously.
A one-off item is a charge or income that meets two conditions:
The recurrence test is more important than it sounds. Many sellers present costs as one-off that turn out to be recurring under different names. If a company reports "exceptional restructuring costs" every single year, those costs are structural, not exceptional.
Transaction-related costs: M&A advisory fees, legal fees, due diligence costs incurred in the context of a transaction — these are unambiguously non-recurring.
Redundancy and severance payments: one-off departures, particularly of senior executives. Must be verified against HR records.
Gains or losses on asset disposals: selling a building or a non-core asset creates a one-time gain (or loss) that does not reflect operating performance.
Legal settlements: a one-time litigation payment that has been resolved. Requires legal counsel confirmation.
Costs related to a specific project: set-up costs for a new site that is now operational, or IT migration costs for a completed project.
Recurring business restructurings: if the company reorganises every 18 months, the restructuring cost is embedded in the cost base.
Training and development: sometimes claimed as exceptional, rarely justified — ongoing training is part of running a business.
R&D costs labelled as one-off: unless the project was genuinely extraordinary and will not be repeated, ongoing R&D is a permanent cost.
Management fees to related parties: these need careful examination — they may reflect ongoing economic arrangements, not one-time events.
For every add-back proposed by management, an FDD analyst will:
"I would request the invoice for each adjustment, verify that the same or similar charge doesn't appear in prior periods, and assess whether there's an ongoing obligation that could recur. If the documentation is clear and the non-recurrence is verifiable, I'd accept the add-back. If it's recurring under different labels, I'd challenge it."
The programme's case studies include management adjustment schedules with contested items for you to validate or reject — exactly the exercise you'll face in a live interview or on the job.
Hundreds of candidates prepared their interviews with this programme. Those who landed the role have one thing in common: they worked the cases before walking into the room.
