Three numbers. Three different questions.
“We are looking for a business between these numbers” leaves an important question unanswered: numbers measuring what?
Revenue, EBITDA and purchase price belong in separate fields. Each communicates a different part of the acquisition you are considering. Labeling them clearly prevents a reviewer from filling in the gaps with assumptions.
Revenue describes sales over a period.
Revenue reflects sales from products or services over a stated period. It comes before the full set of expenses used to determine net earnings. The SEC’s financial-statement guide explains this distinction in its income-statement section.
In your brief, label the period as well as the currency. A last completed financial year, a trailing twelve-month period and a forecast are different descriptions. If your preference has no agreed period yet, identify that as unresolved.
EBITDA needs a clear definition.
EBITDA means earnings before interest, taxes, depreciation and amortization. It is a non-GAAP measure. In Section 103 of its non-GAAP guidance, SEC staff distinguish EBITDA from differently calculated measures such as adjusted EBITDA.
When writing criteria, say whether you mean EBITDA or adjusted EBITDA. If adjustments are involved, identify the basis you would need to understand. Do not assume the same label makes two figures directly comparable. SEC staff address clear descriptions and comparability in Question 100.05.
Keep the earnings period visible, too. A size preference based on one period should not quietly become a preference based on another.
Purchase price describes the proposed transaction.
A purchase-price preference communicates what you are considering paying, subject to the transaction’s scope and terms. It is not another name for annual revenue or EBITDA.
State what your price label covers. If you mean enterprise value, label it enterprise value. If you mean equity purchase price or cash at closing, use that label and note the assumptions that remain unresolved. These labels need a transaction-specific discussion; this brief does not calculate one from another.
Leave each range independent.
Enter a revenue preference only where you have one. Do the same for the earnings measure and the price preference. Leaving a range open is clearer than deriving it from an assumed margin or valuation multiple.
- Revenue: currency, period and any relevant reporting basis.
- Earnings: measure, period and definition of any adjustments.
- Price: intended meaning, scope and unresolved transaction assumptions.
None of these fields, by itself, establishes affordability, financing availability or what a business is worth.
Use the brief to make your terminology explicit. A human reviewer can then identify which figures need clarification before a search scope or engagement is discussed.
Educational information only. This article provides no valuation, accounting, legal or investment advice and makes no assumption about any particular business.