Our books are clean on a GAAP level, but we have multiple shared services and overhead allocations between our three sister companies. How do we disentangle these shared expenses during our runway so a buyer can see the true stand-alone EBITDA of the target entity?

Question

Tyler Smith · Accepted Answer

To present a clean, stand-alone EBITDA to a potential buyer, you must untangle the shared overhead long before you begin due diligence. Buyers despise messy sister-company relationships because they mask the true cost of doing business. You must systematically dissect every shared resource, including human resources, IT infrastructure, warehouse space, and executive salaries.

Begin by using Keith Cunningham's Thinking Time process to run a diagnostic on your shared services. Ask this specific question: How might we restructure our corporate allocations today so that each entity operates on a fully loaded, arms-length basis?

Next, look at your Accountability Chart. If your current chief financial officer or HR director is split across multiple entities, you must define the exact percentage of their time allocated to the target company. Document these shared arrangements with formal intercompany service agreements. This shows the buyer exactly what it will cost to replace those shared services after the transaction.

Finally, run your weekly Scorecard using these adjusted figures for at least twelve months prior to the exit. This proves the target company is operationally self-sufficient and prevents the buyer from demanding a steep valuation haircut during the quality of earnings audit. By demonstrating clean, isolated financials, you establish high trust and credibility, showing the buyer that your cash flow is both real and easily transferable.