Agree with David. D&A arises from capital expenditures but the amounts on a P&L reflect accounting rules rather than the actual economic loss (change in market value) of those assets. A better way to assess it would be to deduct maintenance capital expenditures (i.e. those capital investments required to keep the business at its current level) from EBITDA if you're using an EBITDA multiple. This reflects the idea that a business that requires ongoing additional investment in the form of equipment that will depreciate over time will be worth less than one that requires no additional investment.

Alternatively, if the equipment value is high relative to the business' profitability, you may look at valuing the business based on the market value of its assets in which case profitability/multiples/etc. no longer matter.

I concur with the above. Due to the nature of depreciation being an accounting adjustment and the fact it can be accelerated, it is not always a fair representation of actual future CAPEX needs. Also, sometimes growing businesses might have a large one-time spend on CAPEX that gets depreciated out quickly but will not be an on-going expense for the business. So you really need to work to understand what future CAPEX was and understand what the future CAPEX needs might be for your business.

Equipment heavy businesses may not end up with much in the way of depreciation add-backs because the on-going CAPEX needs are so high. We see this often with construction companies with lots of heavy equipment or equipment leasing companies, where they constantly need to replace equipment. Happy to look at any scenarios and provide advice. You can reach me here or directly at redacted