S&P Global Study Finds EBITDA Add-Backs Make Up 29% of Earnings, Drive Leverage
An analysis of 700 M&A and leveraged buyout deals by S&P Global finds EBITDA add-backs made up 29% of marketed earnings and correlate to 2.3x more leverage after one year and 2.7x after two. Adjustments now represent up to 30% of EBITDA versus about 10% a decade ago.
1. Study Scope and Key Metrics
S&P Global analyzed 700 M&A and leveraged buyout deals and found that add-backs accounted for 29% of marketed EBITDA figures. This study highlights a direct link between aggressive adjustments and deviations from initial earnings benchmarks.
2. Leverage Projection Variances
The analysis revealed companies carried a median of 2.3x more leverage than projected after one year and 2.7x more after two years. These variances underscore widespread overoptimism in debt repayment forecasts at deal inception.
3. Expansion of Aggressive Add-Back Practices
Adjustments now total as much as 30% of EBITDA versus roughly 10% a decade ago. One independent sponsor described deals treating recurring training costs as one-time charges and claiming unearned ERP savings to inflate earnings.