Adjusted EBITDA: what it is and why it can change the value of your company
Reading time
5 minutes
Date
Jul 13, 2026
Author
Murilo Oliveira — Partner, igc Partners
EBITDA stands for earnings before interest, taxes, depreciation and amortization. In practice, it is a measure of how much cash the company's operation generates before the effects of the capital structure, the tax burden and accounting expenses that do not represent a cash outflow in the period. By isolating operating performance, it has become one of the most widely used metrics to compare companies and to estimate value in transactions.
The EBITDA reported in the financial statements includes what actually happened in the period, including one-off events and expenses tied to the profile of the current owner. Adjusting EBITDA means normalizing that number to reflect the business's recurring generation capacity in the hands of a new controlling owner. Non-recurring items are stripped out, such as an indemnity received, an isolated fine or a project that will not be repeated, along with expenses that would not continue after the sale, such as above-market owner compensation (pró-labore), personal expenses booked to the company or related-party contracts on off-market terms.
A large share of transactions uses multiples on EBITDA to estimate value: EBITDA is multiplied by a factor observed in comparable deals. Because the multiple is applied to EBITDA, each real of well-founded adjustment turns into several reais of value, depending on the multiple applied. That is why the careful construction of adjusted EBITDA is one of the stages that most influence the outcome of a sale, and one of the most underestimated by those who go to market without preparation.
Some cases are typical. The founder who draws an above-market owner's salary for the role: the difference between what they draw and what a hired executive would cost is a positive adjustment. The family's property leased to the company at a token value: the adjustment is negative, because a new owner would pay market rent. The legal expense of an already-closed dispute: a positive adjustment, as it does not recur. The contract with a relative's company on off-market terms: it is adjusted to the price a third party would charge. In all the examples, the logic is the same: to reconstruct the result the business would deliver under normal market conditions, with documentation that supports each line.
There is a clear line between normalizing and inflating. Legitimate adjustments are those a rational buyer would accept as true and documentable: they have an explanation, evidence and economic logic. Aggressive, unsupported adjustments produce the opposite effect. When they surface in due diligence, they undermine the credibility of the entire number and weaken the seller's position. A strong adjusted EBITDA is one that survives the buyer's scrutiny, not one that looks larger in the first material.
Before the company goes to market, in the preparation phase. It is at this moment, away from the pressure of negotiation, that the items to be normalized are identified, the documentation that supports them is gathered and a clear bridge is built between the accounting result and adjusted EBITDA. Reaching due diligence with this work done accelerates the process and protects value; leaving it for later usually comes at a high cost, in time and in price.
At igc, building adjusted EBITDA is part of the preparation that precedes going to market. It is not a window-dressing exercise, but the faithful translation of the business's recurring generation capacity, documented in a way that withstands the buyer's scrutiny. It is this rigor that sustains value throughout the process, from the approach to the final negotiation.
The work is led by the partners, owner to owner, with the experience of more than 500 completed transactions. Building a defensible adjusted EBITDA and a solid value thesis is what turns preparation into price.
EBITDA is the operating generation reported in the period; adjusted EBITDA strips out non-recurring items and expenses that would not continue under a new owner, reflecting the recurring capacity of the business.
Typically, above-market owner compensation, personal expenses booked to the company, related-party contracts outside market conditions and non-recurring events, such as fines or already-closed disputes. Each adjustment needs documentation.
No, when the adjustments are legitimate and documented. Dressing up is inflating without support, which tends to be dismantled in due diligence and harms the seller's credibility throughout the process.
Generally, the M&A advisor together with the company, in the preparation phase, gathering the evidence that supports each adjustment before starting conversations with buyers.
