Maintenance Capex vs Growth Capex
The split of capital expenditure between spending required to maintain existing capacity (maintenance) and spending to expand the business (growth).
Also known as: Stay-in-business capex, Expansion capex
Maintenance capex
Spending required to keep the business running at current capacity — replacing worn machinery, upgrading essential IT. This is effectively a cash cost that EBITDA ignores.
Growth capex
Spending to expand capacity or capabilities — new production lines, new sites, acquisitions. This is discretionary and creates future EBITDA.
TS relevance
EBITDA ignores all capex. TS teams calculate EBITDA minus maintenance capex (a proxy for sustainable free cash flow) to assess whether the business can actually service its debt and reward equity holders.
Related terms
Capex vs Opex
The distinction between capital expenditure (long-term asset investment, capitalised on the balance sheet) and operating expenditure (period cost, expensed through the P&L).
EBITDA
Earnings Before Interest, Taxes, Depreciation and Amortisation — the most cited profitability proxy in M&A.
D&A (Depreciation & Amortisation)
The systematic allocation of the cost of tangible (depreciation) and intangible (amortisation) long-term assets over their useful lives.