By Sergei Mochtchenkov, CFA
Recurring versus non-recurring
A cost is not non-recurring simply because management describes it that way. Compare the ledger across periods: repeated consulting charges, repairs or legal expenses may be part of normal operations even when each invoice relates to a different event. Ask whether the acquired business will need to incur a comparable cost again, and retain the invoices behind the answer.
Owner compensation
Owner compensation needs a replacement-cost view. Removing all of an owner's salary overstates earnings if a buyer must hire someone to perform the same duties. Identify the role, time commitment and expenses first; then explain the assumed replacement cost and evidence behind it. Personal expenses should be isolated from genuine business costs rather than grouped into one unsupported total.
Run-rate adjustments
A planned saving is not the same as a completed change. For a run-rate adjustment, establish when the change took effect, what contracts or payroll records demonstrate it and whether replacement costs offset the benefit. Present buyer-specific synergies separately from the standalone earnings of the business; a buyer should not pay for its own future execution as though it were already historical profit.
Evidence buyers expect
Use an adjustment schedule with ledger references, dates, amounts, rationale and source documents. Reconcile the schedule to the EBITDA bridge and flag disputed items explicitly. To understand the pricing sensitivity, multiply a disputed EBITDA adjustment by the assumed valuation multiple; that is an illustrative enterprise-value effect, not a prediction of the final negotiated price.