Q1 Ebitda adjustments in purchase price

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by a searcher from Harvard University
in Toronto, ON, Canada

2yrs ago

Q1 Ebitda adjustments in purchase price

How is everyone dealing with Q1 books to be adjusted in purchase price? Naturally this quarter books are not closed yet but sellers expect to take into account their increased ebitda, which could be a result of seasonality (dont know for sure until dd is complete), so how are you dealing with this in your loi?

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reply by a professional 2yrs ago
from Birmingham in Atlanta, GA, USA

To remove concerns about seasonality, use trailing twelve months numbers. ending 3/31/24. Internal books should be closed for 1Q24 and any adjustments that you need to make to the first quarter numbers will come out in DD. Rather than offering a firm number in the LOI, I typically use a multiple of TTM EBITDA subject to due dligence.

reply by a professional 2yrs ago
from Southern Methodist University in Garland, TX, USA

Can deal timing wait until final audited numbers come in? Worst case you could use a clawback provision.