Restructuring charges are among the most contested EBITDA adjustments in FDD. Learn the criteria for inclusion, common pushback, and how to present the analysis.
Restructuring costs are one of the most commonly encountered — and most contested — EBITDA adjustments in financial due diligence. Management regularly presents restructuring charges as one-off items to be added back to reported EBITDA. Whether that argument holds up depends on a clear-eyed assessment of the facts.
Restructuring costs cover a range of charges typically associated with reorganising a business. They can include:
The common thread is that management describes these as exceptional, non-recurring items that should not be included in the normalised earnings base.
The key test for any EBITDA adjustment is whether the cost is truly non-recurring in the context of the business. For restructuring charges, this requires examining:
Has the business incurred restructuring charges in each of the last three to five years? A business that books restructuring costs every year — even under different labels — is displaying a structural cost of operation, not a one-time event. Recurring restructuring is effectively an operating cost.
Is there a specific, identifiable programme with a defined scope, timeline, and estimated total cost? A vague "transformation initiative" with no concrete programme definition is harder to defend as a one-off.
If the programme is complete, are there any tail costs still to be incurred? If it is ongoing, when does it end, and what is the total expected cost? Add-backs for programmes that are still running require forward-looking assumptions that buyers will challenge.
Even if the programme is genuinely one-off, does the add-back reflect economic reality? Restructuring often delivers cost savings — but it also eliminates some costs permanently. Buyers need to understand whether the post-restructuring EBITDA is truly achievable.
In a buy-side FDD, the analyst will:
The output is a position on each item: supportable as a one-off, partially supportable, or rejected.
In the QoE report, restructuring adjustments are typically disclosed with:
Where a significant restructuring is ongoing at the time of the transaction, buyers may seek a specific indemnity in the SPA rather than relying on the EBITDA adjustment alone.
"We restructure occasionally because markets change." This is a real phenomenon, but if it produces charges every year, it belongs in the run-rate.
"The programme is complete and there will be no further costs." Test this against actual spend versus budget, and check whether there are any remaining provisions.
"This was a one-time integration cost." Agreed — but how many acquisitions has the company made in the last five years, and will it continue to make them?
Knowing how to test and present EBITDA adjustments is one of the most important skills in Transaction Services. Our programme covers 150+ adjustment examples across 8+ case studies, including restructuring scenarios. Full access for €119.99.
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