Restructuring Costs: When Are They Adjusted in EBITDA?

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.

What Are Restructuring Costs?

Restructuring costs cover a range of charges typically associated with reorganising a business. They can include:

• Redundancy and severance payments
• Site closure costs (lease terminations, asset write-offs, clean-up costs)
• Costs of integrating an acquisition
• Consultant fees for transformation programmes
• IT system decommissioning costs

The common thread is that management describes these as exceptional, non-recurring items that should not be included in the normalised earnings base.

The Core Question: Non-Recurring or Structural?

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:

Frequency

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.

Substance of the Programme

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.

Completion Status

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.

Economic Reality

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.

How FDD Teams Approach the Analysis

In a buy-side FDD, the analyst will:

1. Extract all restructuring charges from the P&L over the review period (typically three years)
2. Analyse each charge by programme, year, and nature
3. Assess frequency — if restructuring appears in every period, challenge the non-recurring label
4. Review board minutes and management accounts for supporting documentation
5. Cross-check against the cash flow statement and provisions movements to confirm cash vs. non-cash

The output is a position on each item: supportable as a one-off, partially supportable, or rejected.

Reporting the Position

In the QoE report, restructuring adjustments are typically disclosed with:

• A table showing the charges by year and programme
• A commentary on the basis for inclusion or exclusion
• A note on any tail costs expected in future periods

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.

Common Seller Arguments — and the Rebuttal

"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.