Payments M&A glossary

EBITDA

Earnings before interest, taxes, depreciation, and amortization. The most common profitability metric used to value M&A transactions.

Also known as

Earnings Before Interest Taxes Depreciation and Amortization · Adjusted EBITDA

Full definition

EBITDA is the headline profitability metric for M&A valuation. It strips out capital structure (interest), tax jurisdiction (taxes), and accounting choices (depreciation, amortization) to show operating profitability. M&A transactions are usually expressed as 'enterprise value divided by EBITDA' (EV/EBITDA multiple). 'Adjusted EBITDA' adds back one-time items, owner compensation overpayments, and non-recurring expenses, which is what buyers use to compare across deals. Quality of earnings (QoE) work tests whether adjustments are defensible.

Related terms

Multiples

Ratios of enterprise value to a financial metric (revenue, EBITDA, ARR) used to value M&A transactions by comparison.

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