The buy-side Quality of Earnings firm is refusing to normalize the legal and consulting fees we spent setting up our AI infrastructure, claiming these are ongoing operational costs. How do we classify non-recurring technology setup costs to protect our adjusted EBITDA?

The buy-side Quality of Earnings firm is incentivized to find any reason to categorize capital expenditures as ongoing operational expenses to lower your adjusted EBITDA. To defend your valuation, you must present a clear, documented distinction between one-time structural investments and your standard operational expenses. Review your general ledger and pull out all invoices related to your initial AI setup, technology consultants, and legal fees. Prove that these expenditures were part of a specific, time-limited initiative designed to build a permanent asset, rather than routine maintenance or ongoing software subscriptions. Highlight that these costs have a clear start and end date, and that the infrastructure is now fully built and self-sustaining. Use your documented strategic roadmap and historical milestones to show that this project has concluded. Frame these expenditures as capital investments in your proprietary operational platform. Present your operational workflows to show how these early costs have already resulted in permanently higher margins and reduced headcount requirements. By demonstrating that these development expenses will not recur for the buyer, you can successfully defend these add-backs and keep your adjusted EBITDA, and your overall enterprise valuation, fully protected.

Category: Valuation & Deal Structure