Quality of earnings and normalized EBITDA are critical steps in how buyers evaluate a company’s true earnings power during an M&A transaction. This guide explains how reported EBITDA is adjusted, tested through diligence, and used to support valuation multiples in middle-market deals.
A revenue peg and a working capital peg are two different mechanisms used to determine purchase price adjustments in M&A transactions. While working capital pegs are the standard approach in most middle-market deals, revenue pegs may be used in certain asset-light or recurring-revenue businesses. This guide explains how each method works, when buyers use them, and how they affect the bridge from enterprise value to final seller proceeds.