EVERGREEN, Colo.--(BUSINESS WIRE)--1stWest M&A, a leading investment banking and M&A advisory, just announced its bold position on how to treat reduced (or outright lost) EBITDA for its clients whose performance is negatively affected by the COVID-19 pandemic.
“We are simply stating the obvious: Companies should demand a ‘COVID-19 EBITDA adjustment’ when negotiating their business’ value,” said Ted Rieple, 1stWest M&A’s Managing Partner.
“The pandemic is temporary, and a relatively brief period of suppressed EBITDA should not reduce a company’s long-term value,” Wagner added.
“Potential acquirers must recognize that EBITDA suppressed by COVID-19 is an anomaly, and not a permanent debilitation,” Rieple explained. “COVID-19 losses can, and should, be positive credits to EBITDA for the purposes of company valuation. We are fiercely arguing for our clients to receive this COVID-19 Adjustment to EBITDA.”
The white paper’s premise is simple: Most companies seeking acquisition or recapitalization during or soon after the COVID-19 pandemic will show reduced revenues and EBITDA. Yet it’s widely acknowledged that after a period of time – probably a matter of months – the effects of COVID-19 will diminish, and eventually vanish. Accordingly, if a company seeks acquisition or recapitalization using negative performance caused by COVID-19, that company’s value should not be tied to this temporary period of stress. Instead, those losses should be credits to EBITDA.
About 1stWest Mergers & Acquisitions
1stWest Mergers & Acquisitions is a full-service, international investment banking and advisory firm that is focused on the underserved lower middle-market. The firm has built a unique business solutions platform of assisting owners and shareholders in selling their companies, acquiring other businesses or raising growth capital. With Managing Directors in the US, Europe, Mexico, Panama, Peru, Brazil, Argentina and Chile, 1stWest M&A is uniquely positioned to serve its clients around the globe. More info: www.1stWestMA.com