Normalized EBITDA
EBITDA restated to remove one-off items and reflect a sustainable, run-rate level of profitability.
Also known as: Adjusted EBITDA, Recurring EBITDA
One-line definition
Normalized EBITDA strips out non-recurring, non-operating, and owner-specific items so that a buyer sees the true earnings power of the business.
Why TS cares
Every M&A deal price is anchored to an EBITDA multiple. If the EBITDA base is inflated by one-offs, the buyer overpays; if understated by exceptional costs, the seller leaves money on the table. Normalisation is the battleground.
Typical adjustments
- Removal of one-off legal or restructuring costs.
- Removal of M&A transaction fees.
- Owner's salary adjusted to market rate.
- Add-back of costs related to discontinued activities.
- Pro-forma for annualisation of new contracts or headcount.
Related terms
EBITDA
Earnings Before Interest, Taxes, Depreciation and Amortisation — the most cited profitability proxy in M&A.
Quality of Earnings
The TS work-product that bridges reported EBITDA to a defensible run-rate figure a buyer can underwrite.
Run-Rate Revenue
An annualised revenue figure extrapolated from a recent sub-period, used when the business has grown significantly during the historical period.