Seller Add-Backs

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May 17, 2025

by a searcher from Thunderbird School of Global Management in Salt Lake City, UT, USA

"When I’m reviewing a seller’s adjusted EBITDA, I often see add-backs that make earnings look stronger. As a buyer, what are some smart add-backs I should be making on my end — things that might reverse seller adjustments or reflect real operating costs post-close? How do you typically separate what's truly discretionary from what’s essential to run the business?"
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Reply by a searcher
from University of Tromsø in Dover, Delaware, USA
Beginners often overlook the owner's salary and work output compared to what is available in the relevant labor market. This could go both ways, but you should know. Same thing with the rest of the staff, are they staying for other reasons than just their salary? If so, will those reasons disappear with the seller?
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Reply by an investor
from Seattle University in Seattle, WA, USA
As for all the various non-comp expenses addback (travel, cell phones, one time legal, etc), I generally just assume they are accurate and then prove them out once the deal is under LOI via the quality of earnings report.
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