Industry jargon unpacked
EBIT
A measure of a company’s operating profitability – earnings before interest and tax. EBIT is frequently used as a valuation baseline.
New Equity structure deals where EBIT metrics work for you, not against you especially when earnouts or ongoing involvement are part of the outcome.
We look at your EBIT the way buyers will – helping you strengthen what matters and address what would concern them.
EBITDA
Earnings before Interest, tax, depreciation and Amortisation Your business's cash-generating power from operations – the number most buyers use to value your business (e.g., 6x EBITDA).
This is the baseline for your valuation. A £2m EBITDA business at 2x = £4m. At 4x = £8m. Small improvements in EBITDA or the multiple can mean millions to you.
We analyse your EBITDA through a buyer's lens, identifying legitimate adjustments that position your profitability for maximum impact. We help you understand what's realistic and what would move the needle.
Earnout
A portion of the purchase price paid based on the business achieving specific targets (usually EBITDA or revenue) post-acquisition, typically over 1-3 years.
New Equity negotiates earnouts that are achievable and fair, ensuring targets are realistic, you retain enough control to hit them, and the terms don't penalise you for factors outside your influence.
Multiples on exit
The multiplier applied to your EBITDA (or revenue) to determine your business's value.
The multiple is where most value is won or lost. A business with £3m EBITDA at 5x =£15m. The same business at 7x = £21m.Understanding what drives your multiple is critical.
We identify what realistic multiples are for your business, what's holding you back and which buyers would pay the highest multiple for what you've built. We don't just accept market rates; we create strategy to maximise yours.
Working capital
The difference between current assets and current liabilities. Represents the capital needed to run day-to-day operations.
Working capital adjustments can significantly impact your proceeds. Seasonal businesses or those with lumpy cash flow are particularly exposed.
New Equity can help you understand working capital expectations in your deal – ensuring you're not penalised for normal business fluctuations, the baseline is set fairly, and you're prepared for what the calculation will look like at close.