The 2026 EBITDA Add-Back Standard: 20 adjustments and how buyers treat them

Most private technology and services businesses are priced as a multiple of adjusted EBITDA. Sellers focus on the multiple. Experienced buyers focus on the adjustments, because every dollar added back to EBITDA is worth the multiple again in purchase price.

That makes add-backs the single most contested line in a sale process. The seller's schedule arrives with the information memorandum. The buyer's quality of earnings provider then rebuilds EBITDA from the general ledger, and every adjustment that cannot be evidenced comes out. When that happens after the letter of intent, the result is a price retrade, and retrades are where deals lose momentum.

There is no mandatory add-back standard in private M&A. This report sets one out: 20 common adjustments, the evidence that gets each accepted, the risk it poses to the deal, and our verdict.

Two principles sit behind every verdict. First, would the buyer have to keep paying this cost to keep the revenue being valued? If yes, it is an operating expense and cannot be added back. Second, can the seller prove it? An adjustment that is true but undocumented is treated the same as one that is false.

• Green zone: allowedOwner salary normalisation, discontinued operations, transaction fees, settled litigation and fixed-scope implementation projects. These are standard quality of earnings adjustments and are accepted when documented.
• Yellow zone: negotiableConference travel, one-off recruiting fees, relocation, restructuring and exceptional cost spikes. Acceptance depends on evidence and on the buyer. A strategic acquirer that will absorb the function may accept more than a private equity buyer that will run the business standalone.
• Red zone: rejectedFounder research trips, personal assistants with operational duties, marketing experiments, unproven R&D and any 'one-off' that recurs. Leaving these in the schedule costs more than the add-back is worth, because it damages the buyer's trust in every other number.

Listed US companies that present adjusted EBITDA are bound by the SEC's rules on non-GAAP financial measures: Regulation G and Item 10(e) of Regulation S-K. These rules do not govern private transactions, but quality of earnings teams and lenders use the same logic.

• No removing normal operating costsSEC staff guidance (Non-GAAP Compliance and Disclosure Interpretation 100.01) states that excluding normal, recurring cash operating expenses necessary to operate the business can make a measure misleading.
• The two-year testItem 10(e) prohibits describing a charge as non-recurring, infrequent or unusual when it is reasonably likely to recur within two years, or when a similar charge occurred within the prior two years.
• ReconciliationEvery adjustment must reconcile to the nearest GAAP measure. In a private sale, the equivalent is a bridge from statutory accounts to adjusted EBITDA, line by line.

1. 01Start from the ledger, not the narrativeTie every adjustment to general ledger entries and supporting invoices. Buyers rebuild EBITDA bottom-up.
2. 02Show three yearsA multi-year view proves an item is genuinely one-off. A single year invites the question of whether it recurs.
3. 03Include negative add-backsIf the owner is underpaid relative to the market, reduce EBITDA yourself. Volunteering it builds credibility for the positive adjustments.
4. 04Remove red-zone items before launchAn aggressive schedule does not anchor a higher price. It gives the buyer a reason to discount everything else.
5. 05Commission a sell-side quality of earnings reviewFor businesses above roughly $2 million of EBITDA, an independent review before launch moves the argument from the buyer's accountants to yours.

To see how adjusted EBITDA flows into a headline price, run the numbers through our SDE and EBITDA calculator, then test the offer structure with the LOI Value Decoder.

The verdicts in this report are Acquiry's professional assessment of how buyers and their quality of earnings providers typically treat each category. They are informed by public regulatory guidance and our own mandate work. They are not the output of a statistical survey, and we do not publish acceptance percentages because no public dataset records them.

• US Securities and Exchange CommissionRegulation G and Item 10(e) of Regulation S-K, conditions for use of non-GAAP financial measures.
• US Securities and Exchange CommissionNon-GAAP Financial Measures, Compliance and Disclosure Interpretations, Question 100.01.