The Overlooked Advantage of EBITA

Five letters haunt the sleepless nights of any business owner seeking acquisition: EBITDA.

The acronym is thrown around so widely, you’d think its repercussions would be universally internalized. You’d think – and you’d be wrong.

Case-in-point, a pop quiz: what’s the impact on the sale price of a manufacturing company borrowing at 4% versus 16%?

For a sale price garnered from a multiple of EBITDA, none. Mind blown? You’re in good company.

I get it: today’s interest rates are high. But EBITDA spells it out in plain letters: high interest rates are no hindrance if leverage produces profit.