The buyer is claiming we have significant deferred capital expenditures in our fleet and IT systems, and they want to deduct this future expense from our purchase price. How do we prove our capital investment history is adequate to protect our multiple?

Question

Tyler Smith · Accepted Answer

Buyers frequently look for deferred maintenance or underfunded capital expenditures as an opportunity to reduce the final purchase price. They will argue that your historical EBITDA was artificially inflated because you failed to invest in necessary equipment, vehicle fleets, or technology upgrades, and they will demand a dollar-for-dollar reduction in the enterprise value.

To defend against this claim, you must present a detailed, multi-year history of your capital expenditures alongside a clear operational roadmap. Start by compiling a capital asset ledger that shows the age, condition, and depreciation schedule of all physical and digital assets. Proving that your equipment is within its useful life and that you have consistently spent a stable percentage of revenue on maintenance will neutralize their arguments.

Next, show how your operational systems prevent unexpected capital costs. If you run your business using EOS®, show the buyer your long-term V/TO® and your quarterly Rocks. This demonstrates that capital allocation is a planned, strategic process rather than a series of reactive fixes.

If you have recently transitioned to cloud-based systems or automated your workflows using AI, highlight how this shift has permanently reduced your future physical CapEx requirements. Explain that your operating expenses now cover what used to require heavy capital outlays.

If the buyer still insists on a deduction, negotiate to include any disputed capital expenses in the net working capital calculation rather than a direct multiple reduction. This keeps the discussion focused on balance sheet adjustments rather than a permanent reduction of your valuation multiple.