EBITDA

What Is EBITDA?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. It is a financial metric designed to approximate the operating cash generation of a business by stripping out non-operational items (interest and taxes) and non-cash charges (depreciation and amortisation).

EBITDA is not defined by accounting standards (it does not appear in Spanish GAAP/Plan General de Contabilidad or IFRS financial statements) — it is a non-GAAP metric constructed from the income statement. This means there is no single universally agreed calculation, and users should always verify what adjustments have been applied.

How to Calculate EBITDA from Spanish Accounts

Spanish annual accounts (cuentas anuales) present the income statement in a functional format with specific line items that differ from IFRS presentation. Starting from the Spanish income statement:

Result of the year (Resultado del ejercicio)
+ Corporate Tax (Impuesto sobre Sociedades)
+ Financial expenses (Gastos financieros)
- Financial income (Ingresos financieros)
+ Depreciation and amortisation (Amortizaciones y deterioros)
= EBITDA

Alternatively, EBITDA can be approximated as:

Operating result (Resultado de explotación — EBIT)
+ Depreciation and amortisation (Amortizaciones)
= EBITDA

Adjusted EBITDA in M&A

For M&A purposes, buyers and their advisors typically work with Adjusted EBITDA — EBITDA normalised to remove one-off, non-recurring, or non-arms-length items that distort the underlying profitability of the business. Common adjustments in Spanish SME transactions include:

• Owner salary normalisation: Many Spanish family businesses pay owner-managers below or above market salary rates. The adjustment reflects the market cost of replacing their role.
• Discretionary expenses: Personal expenses run through the business (cars, meals, travel) that would not exist in a third-party-owned business.
• Non-recurring items: Restructuring charges, legal settlements, one-off capex written off.
• Related-party transactions: Rent or service arrangements with related parties that are not at market rates.
• IFRS 16 treatment: Whether operating lease costs are included or excluded (pre-IFRS 16 EBITDA vs IFRS 16 EBITDA, relevant for companies reporting under IFRS).

This process is known as Quality of Earnings (QoE) analysis — a critical part of financial due diligence.

EBITDA Multiples in Spain

Valuation by EV/EBITDA multiple involves multiplying the target’s Adjusted EBITDA by an appropriate sector multiple to arrive at an Enterprise Value (EV), from which net debt is deducted to reach the equity value (purchase price for 100%).

Approximate EBITDA multiples observed in recent Spanish M&A transactions (2023–2025):

These ranges are indicative only and vary significantly by growth profile, margin quality, customer concentration, and deal size.

Limitations of EBITDA

EBITDA is frequently criticised as a metric because:

1. It ignores capital expenditure (capex) — a business may have high EBITDA but require constant heavy investment to maintain it, making free cash flow much lower.
2. It ignores changes in working capital — a business with growing revenues may consume significant cash in working capital even with healthy EBITDA.
3. It can be manipulated through accounting policies (timing of expense recognition).

For these reasons, sophisticated buyers also analyse EBIT, free cash flow, and returns on invested capital (ROIC) alongside EBITDA.

How BMC Can Help

Our corporate finance team prepares financial models, quality-of-earnings analyses, and EBITDA bridge presentations for M&A transactions, investor presentations, and financing processes, applying the adjustments and sector context required for accurate interpretation.