Conversation about acceptable ad back with off market seller

April 18, 2026

by a searcher from Northwestern University - Kellogg School of Management in Brooklyn, NY, USA

I’m looking at a business where the seller thinks he has a EBDITA of $800,000 however she is adding back 100% of his salary, adding back accounts payable and subtracting accounts receivable when you remove the accounts payable and accounts receivable because those are more balance sheet items and you adjust to acceptable replacement salary for a CEO the truth EBITDA is around 450 to 475. Even at that lower amount, I’m still interested but naturally at a slightly lower multiple and as a multiple of that lower EBITD, how do people recommend explaining acceptable and non-acceptable add back to seller? Do you recommend sending an email outlining it on a phone call or something else. Please note this is a non-broker deal and off market.

Reply by a searcher
from Northwestern University in Richmond, VA, USA

Hey Tucker, first off I would highly recommend having this conversation via phone and then following up with an email. The seller could have a blow-up reaction to this, and you can walk them through the logic in real-time to help dispel any negative emotions. Plus, bringing a more human element to conversations like this is always more productive. To answer your first question, if you haven't already, I would recommend starting the discussion on working capital now and using that to explain how AR and AP are accounted for there and not in the calculation of EBITDA. That should help soften to blow that their EBITDA is not nearly as high as they have in their head, but the AR and AP are still accounted for as part of a transaction.

Reply by an intermediary
from Mount St. Mary College in Orange County, NY, USA

Agree with everyone else, phone or even in person if possible. We find that time is often the cure for situations like this. I meet with a lot of people with unrealistic expectations, its our job to educate them to the market or let time pass. Both strategies seem to work, we rarely see things transact on way out numbers.

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