19/05/2025
Insights
Getting your firm valued is a vital step when you are putting it on the market. It helps buyers and sellers agree on a fair price during negotiations, ensuring a seamless process whether you are entering or exiting an industry.
EBIPTA is one of the most common company valuation methods, but understanding what it means can be difficult. We have broken down everything you need to know, so continue reading to learn more.
What does EBITDA stand for?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortisation, and is a financial metric used to evaluate a business’s operating performance. Here is what each part means in simple terms:
- Earnings – Net income or profit
- Interest – Cost of debts
- Taxes – Government-mandated tax obligations
- Depreciation – Tangible asset value reduction over time
- Amortisation – Intangible asset value reduction over time
How do you calculate EBITDA?
The two formulas for EBITDA are as follows:
- Net income + Interest + Taxes + Depreciation + Amortisation = EBITDA
- Operating Profit + Depreciation + Amortisation = EBITDA
Why does EBITDA matter during business sales?
From a buyer's perspective, EBITDA shows the profitability of the core business and how much cash it generates, giving them a clearer picture of the opportunity at hand. However, it is still important for interested parties to conduct their own due diligence to verify the EBITDA numbers.
EBITDA also matters to the seller because it can drive the sale price by highlighting how much money is being made, justifying the asking price and building buyer confidence in the process.
Find out the EBITDA of your company now
As you can see, working out EBITDA is vital if you are hoping to sell your business quickly and for the right price. Our valuations include this element to ensure all parties understand what they are buying or selling.
Contact us today if you have a company to sell, and we will figure out the Earnings Before Interest, Taxes, Depreciation and Amortisation on your behalf.
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