What is maintainable EBITDA?
Short answer: Maintainable EBITDA is an evidence-based estimate of recurring EBITDA under normal ownership and operating conditions. It differs from reported EBITDA, adjusted EBITDA and forecast EBITDA because it applies purpose-specific normalizations to establish a sustainable earnings base.
Potential adjustments include a genuinely non-recurring closure cost, an owner expense that will cease, a missing market-level management salary, unsustainable revenue, temporary support or the full-period effect of an implemented change. Adjustments can increase or decrease earnings. A pro forma benefit should reflect an action already completed or supported by a credible basis, not an aspiration. Cost synergies available only to one buyer normally belong in that buyer's valuation case rather than the seller's standalone maintainable EBITDA. The measure remains before interest, tax, depreciation and amortization and is not cash flow.
How it works
Start with EBITDA reconciled to the financial statements for a defined period. Create a schedule showing each adjustment, amount, direction, accounting line, supporting document, period and rationale. Test whether it is exceptional, incremental, recurring and already captured elsewhere. Normalize related revenue and costs together. Reflect owner or related-party transactions at a supportable market basis. Separate historical normalizations from forecast growth and buyer-specific synergies. Reconcile the final bridge, retain evidence such as contracts and payroll records, and run sensitivity for disputed items. Check the sale agreement and lending definitions independently because they may cap or prohibit adjustments.
Maintainable EBITDA = reported EBITDA + supported positive adjustments - supported negative adjustments
Example
Reported EBITDA is 2,000. A documented one-time site closure cost of 150 is added back. A founder salary of 80 is already included, but a replacement executive is expected to cost 220, so a further 140 is deducted. Revenue of 300 from a discontinued low-margin contract contributed 60 of EBITDA and is also deducted. Maintainable EBITDA is 2,000 + 150 - 140 - 60 = 1,950. A buyer's expected procurement synergy of 100 is excluded because it is not part of standalone maintainable performance.
Why it matters
The decision is which earnings can reasonably persist under normal ownership and operating conditions. Management and sellers need balanced evidence for every adjustment because unsupported add-backs weaken credibility. Buyers test the bridge as an input to valuation and downside cases. Lenders may use a different adjusted EBITDA with contractual caps, while equity investors consider both sustainable earnings and the cash required to maintain them before applying a multiple or return case.
Maintainable EBITDA is not defined by IFRS Accounting Standards or US GAAP and is not audited simply because reported inputs were audited. Different parties can reach different conclusions from the same facts. The SEC warns that inconsistent or misleading non-GAAP adjustments can be problematic for public disclosures. EBITDA also omits working capital, capital expenditure, tax and financing. Transaction documents, facility agreements, accounting rules and securities laws govern their respective uses, so specialist advice may be necessary.