EBITDA normalisation in Belgian M&A: what really moves the valuation

When a company goes to market, the EBITDA number on the financial statements is almost never the number the deal gets done on. Buyers rebuild EBITDA from the ground up through normalisation. Sellers who do not run the same exercise first often discover the gap at the worst possible moment. In the mandates we run, normalisation adjustments typically shift EBITDA by 5% to 25%, which at a multiple of 6x to 8x translates directly into millions on the final price.

What EBITDA normalisation actually is

Normalised EBITDA is the earnings figure a buyer would expect from the business in steady state, once all items that are not representative of recurring operations have been adjusted out. It is not a cosmetic exercise. It is how the acquirer estimates the sustainable cash generation capacity of the target.

The principle is simple. Strip out what is extraordinary, non recurring, or unrelated to the core business. Add back what would normally be there but is temporarily absent. The number you land on is the basis for valuation.

The standard adjustments in Belgian mid market deals

The adjustments most commonly seen in Belgian mid market deals cover a few recurring categories.

Owner compensation. The managing shareholder often pays themselves above or below market for reasons unrelated to business performance. Normalisation brings compensation to the level a professional CEO would earn for the same role.

Related party transactions. Rent paid to a property company owned by the same family. Management fees to a holding. Services purchased from a sister company at non market terms. Each of these needs to be repriced at arm's length.

One time events. Restructuring costs, legal settlements, loss making contracts that were terminated, gains on asset disposals. These move EBITDA up or down but do not reflect recurring performance.

Non recurring revenue. Large one off contracts that will not repeat. Covid related support measures. Subsidies that are ending. Anything that inflates the current year but does not represent the run rate.

Capex classified as opex or the reverse. Repairs that should have been capitalised. Maintenance that was capitalised but is in substance recurring.

The adjustments sellers miss and buyers will not

Sellers tend to focus on add backs that lift EBITDA. Buyers will also pursue adjustments that lower it. A professional due diligence will surface both.

Common downward adjustments include understaffed finance or IT functions where the buyer will need to invest after closing. Undervalued inventory or receivables that need to be provisioned. Deferred maintenance that has kept capex artificially low. Customer concentration risk that justifies a lower multiple or an adjustment in the negotiation.

Ignoring these does not make them disappear. It simply means the buyer raises them after the LOI is signed, when the seller has less leverage to push back.

Preparing normalisation before going to market

The strongest position a seller can be in is to arrive at the first buyer meeting with a fully documented normalised EBITDA, each adjustment explained, each one supported by evidence. This does three things. It signals professionalism and sets the reference number in the buyer's head. It narrows the negotiation to adjustments the seller has already priced in. It shortens due diligence because most of the work has already been done.

In practice, this is the output of a vendor due diligence or a pre market readiness review. Whether done in house or with an external advisor, the exercise pays for itself every time.

The dups approach

At dups, we start every sell side mandate with a full normalisation exercise before the business is shown to buyers. We document each adjustment, build the supporting evidence, and stress test the number against how a professional buyer will rebuild it. The result is that when the LOI conversation starts, EBITDA is defended, not negotiated from scratch. If you are preparing a transaction and want to know what your defensible normalised EBITDA actually looks like, let us talk.