Since most businesses are purchased as a multiple of earnings (expressed as earnings before interest, taxes, depreciation and amortization, or EBITDA), the seller has substantial motivation to get those earnings as high as possible before putting the company up for sale.
This focus on earnings is a normal function of everyday operations for any successful business.
However, since every dollar added to EBITDA can bring back a substantial return in valuation through a sale – often 7X, 8X or higher – sellers are particularly eager to put dollars on the EBITDA line, especially in the trailing 12 months before a sale.
Read more at MJBizDaily’s Investor Intelligence.
