Pro forma adjusted EBITDA is a bridge, not a fact by itself
Every adjustment needs a definition, calculation, and evidence.
Buyers often value middle-market companies by applying a multiple to a measure of earnings. One measure you may encounter is pro forma adjusted EBITDA.
Start with EBITDA: earnings before interest, taxes, depreciation, and amortization (EBITDA). “Adjusted” means identified items have been added back or deducted to present a different view of ongoing earnings. “Pro forma” usually means the calculation also reflects a change as though it had applied for an entire period—for example, a completed acquisition, a contracted price change, or a facility transition.
The phrase does not create a standard answer. It is a non-GAAP measure, and different parties may calculate it differently. It is also not the same as cash flow. Capital expenditures, taxes, debt service, and changes in working capital still matter.
For sale purposes, the useful work is the bridge. Begin with a financial statement amount, identify each adjustment, show the period affected, explain why it is representative of future operations, and attach support. Include negative adjustments where necessary, such as the market cost of replacing an underpaid owner or an expense the business will need after closing.
Buyers will distinguish documented, already-realized changes from projections. They may accept, modify, or reject each item. A clean calculation does not force agreement, but it reduces avoidable ambiguity and helps parties debate the same numbers.