How to treat ongoing leases and debts if the seller wants to transition them to me?

September 28, 2025

by a searcher from Narsee Monjee Institute of Management Studies in Toronto, ON, Canada

I'm looking to acquire a Capex heavy manufacturing business which also has servicing trucks. Most of the equipment is paid off but there are 3 trucks with ongoing leases and 1 truck on loan which the seller wants the buyer to take over. Should I reduce the EBITDA to account for lease & debt payments and use industry comps on the adjusted EBITDA or include lease payments in the working capital PEG?

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Reply by a searcher
from University of California, Los Angeles in Dallas, TX, USA

Agreeing with ^redacted‌ here - whether finance or operating leases, the business' EBITDA should be net of the lease expense. In my experience operating leases and finance leases have been reviewed individually and their importance to the business assessed (e.g. seller has 2 old forklifts, buyer already has 4, newer, does not need 2 old ones, they are not the same brand, etc.) - it is also important to review whether lessor will allow the assignment of the lease to buyer (typically they would, but good to check).

Reply by a searcher
from Arizona State University in Scottsdale, AZ, USA

I would recommend fully understanding the details of the lease. All the T&C, as each one can vary. Draw up a schedule of payments and what residual value is. Factor this in your proforma and future cash flow. Typically discount this for wear and tear as they are trucks. Having a buffer say for 6 months in your working capital is a recommended approach. If you have a lender they may even have additional requirements.

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