Normalized EBITDA

Factual definition

An estimate of sustainable or comparable earnings before interest, taxes, depreciation and amortization (EBITDA) after stated adjustments to reported earnings. It is not a standardized measure or a guarantee of future performance, and adjustments require evidence.

Normalized EBITDA in round numbers

Hypothetical annual amounts in US$ thousands: reported EBITDA already deducts owner compensation that is 400 above supportable replacement pay and 150 of personal costs. If these are separate, nonoverlapping expenses that will not recur under the new operations, the supported uplift is 400 + 150 = 550. The replacement salary remains an expense.

Shayne Fitz-Coy’s definition of Normalized EBITDA

Fitz-Coy treats normalized EBITDA as a price number rather than an accounting number. Because price = multiple × adjusted earnings, every dollar of accepted adjustment is worth multiple dollars of price.

A buyer who accepts a $50,000 add-back at 5x has spent $250,000 on a belief. His leveraged buyout (LBO) teaching makes the connection explicit: the walk-away price is computed before looking at the asking price, and the earnings input to that computation is normalized EBITDA.

An unsupported add-back does not merely flatter a metric, it moves the maximum price the buyer can justify paying.

How Shayne Fitz-Coy uses Normalized EBITDA

In his course, the earnings-adjustment trio is taught as one story: the restructuring charge that appears every year is not a one-time event but a recurring cost wearing a costume. Adjusted EBITDA is what the contract says.

Normalized EBITDA is what diligence produces. The operating question he poses is which version of earnings the decision rests on, and what evidence supports each adjustment.

The course’s required-growth heuristic supplies the stakes: if the seller’s price needs more than about 25% annual EBITDA growth to hit the return, the buyer is paying for a transformation rather than buying a business.

Every dollar of add-back you believe is multiple dollars of price you pay.

Why Shayne Fitz-Coy’s perspective on Normalized EBITDA matters

Earnings quality and price discipline are the same subject. A student who can recompute EBITDA but cannot interrogate an add-back has half the skill.

A seller who understands the mechanism understands why buyers pay for evidence.