Add back schedule
Valuation & CompsThe line by line list of items added to reported EBITDA to reach an adjusted figure, and the document a price is argued over.
Also written: add backs, EBITDA add backs, add back bridge
The add back schedule is the bridge from what the accounts say to what the seller wants the business priced on. It is presented as arithmetic and functions as a negotiation, because each line is a separate claim that can be accepted, rejected or partly allowed.
It is priced at the multiple. At 10.0x every euro of accepted add back is ten euros of enterprise value, which is why a schedule that looks like housekeeping absorbs weeks of diligence and why the buyer's accountants go through it line by line rather than in aggregate.
Lines sort into three groups. Genuine one offs, which almost any buyer accepts. Contested items, above all share based compensation, where reasonable people land differently and the honest answer names both sides. And lines that should not be there: recurring costs labelled exceptional, and run rate savings the buyer will have to deliver itself.
A junior is often the first person to read one properly. Being able to say which lines will survive, and what evidence would settle the rest, is one of the more immediately useful things to bring to a deal team.
Worked example
A schedule shows 18 of restructuring, 12 of transaction fees, 14 of share based compensation, 16 of business optimisation charged for the fourth consecutive year, and 20 of savings from a headcount plan not yet executed.
The first two survive. The optimisation line fails because a cost that recurs is a cost base, and the savings line fails because the buyer will not pay today for work it does tomorrow. The share based compensation line is where the argument actually happens.