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Consulting Glossary

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortisation — a core measure of operating profitability.

EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) is a financial metric that measures a company's operating profitability by removing the effects of financing decisions, tax environments, and non-cash accounting charges. It is widely used in M&A, private equity, and corporate finance as a proxy for cash earnings and a basis for business valuation.

In Consulting

How EBITDA Is Used in Practice

EBITDA is central to M&A and PE advisory work. Enterprise value is typically expressed as a multiple of EBITDA (e.g., '8x EBITDA'). Due diligence often focuses on 'EBITDA quality' — whether the reported figure is reliable, sustainable, and representative of the true earnings power after adjusting for one-offs, related-party transactions, and above-market management costs.

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Where Karter McKinley Applies This

M&A Advisory
We advise buyers, sellers, and investors across the full deal lifecycle — origination, due diligence, structuring, and post-merger integration.
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Financial & Investment Advisory
We advise on capital structure, investment strategy, and financial performance — helping organisations raise capital, deploy it intelligently, and manage risk.
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FAQ

Frequently Asked Questions about EBITDA

What is a good EBITDA margin?
EBITDA margin varies enormously by industry. Software businesses might target 20–40%+ margins. Professional services firms typically achieve 15–25%. Manufacturing businesses often achieve 8–15%. Context and industry benchmarks are essential when interpreting EBITDA margins.
What is adjusted EBITDA?
Adjusted EBITDA adds back non-recurring or exceptional items to arrive at a normalised view of earnings — removing one-off restructuring charges, litigation costs, and management fees above market rate. In M&A, adjusted EBITDA is typically used for valuation multiples, but buyers and sellers often dispute which adjustments are legitimate.

Related Terms

Also in Our Consulting Glossary

Due Diligence
A comprehensive investigation of a business before a transaction or significant commitment.
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Mergers & Acquisitions (M&A)
Transactions in which companies are consolidated — through mergers, acquisitions, divestitures, or buyouts.
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Private Equity
Investment in private (non-publicly traded) companies, typically through structured funds with defined investment periods.
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