Three acquisition targets. No reported EBITDA survived normalization.

The situation

An industrial group was running an acquisition program across three targets in adjacent segments of its own market. Each seller had presented earnings and a price expectation. One had commissioned an independent valuation to support the ask. The buyer’s question was not whether the strategic logic held — it did — but whether the price could be defended by the numbers underneath it.

What the numbers showed

In every one of the three targets, the figure presented as EBITDA required rebuilding before it could carry a price:

• Operating costs settled outside the income statement, paid directly by shareholders through profit distributions, leaving reported profitability overstated.
• Related-party balances owed by shareholders carried on the balance sheet as an asset.
• A prior-period restatement posted directly to equity rather than through the income statement.
• Earnings concentrated in a small number of customers, with a coefficient of variation high enough to make any single-period annualization unreliable.
• In the buyer’s own prior offer model, a contingent-consideration simulator that returned zero in every scenario because a column had been deleted. The offer on the table had been built on a calculation that did not run.

Normalized earnings landed between roughly 40% and 60% of the reported figure across the three targets. At the price being asked in the most advanced negotiation, the implied multiple sat at roughly twice the upper end of the range comparable transactions support for manufacturers of that size.

The decision

The buyer redefined its price ceiling well below the headline ask and restructured the offer: a fixed component sized to earnings the target had already demonstrated, and contingent consideration sized to the earnings the seller was projecting. The seller is paid in full — and paid more than the original ask — only if the projection is right.

What changed

The group entered negotiation with a ceiling it could defend line by line, rather than a number arrived at by working backwards from what the seller wanted. The capital genuinely at risk was reduced to the fixed component, and the burden of proof on the growth case moved to the party making the claim.

What this engagement was not

Not a valuation opinion. Not due diligence. Not transaction intermediation. The mandate was to assess whether the acquisition made sense and at what price — the scope was preliminary analysis, and the deliverables say so.

Anonymised at client request. Figures are stated as ranges or ratios where absolute values remain commercially sensitive.