Add-backs directly impact adjusted or normalized EBITDA, which again influence valuation. Certain adjustments may be speculative or not clearly or adequately supported, so those items may only prove out in post-transaction operations.
In that case, those type of items may drive earnout thresholds and contingent valuation. I would point out that earnouts and working capital adjustments are the two areas subject to the largest number of post-transaction closing disputes. So, be very cautious in assessing how, for example, earnouts are documented and measured.
