The Situation
The company had spent multiple years building a SaaS platform that launched in the middle of the trailing-twelve-month diligence window. GAAP treatment didn’t allow most of those costs to be capitalized, so they sat in operating expense, weighing down historical EBITDA right at the moment the company was trying to sell on a forward-looking multiple.
The R&D was real, the build was complete, and the costs were not going to recur. But proving that — and surviving a Q of E pushback — required a methodology, not a hand-wave.
What CEI did
Built the add back architecture by category: one-time external consulting, software, and vendor costs added back in full; shared-use services apportioned on documented usage estimates; salaries apportioned by individual time allocation to the platform build.
Created a separate methodology tab in the adjusted model documenting the rationale, the apportionment basis, and the supporting data — making the methodology audit-traceable rather than verbal.
Defended the carve-out across three rounds of Q of E review with the buyer’s accountants, providing the supporting detail per category as requested.
Held the line on every dollar that had a defensible methodology and conceded the small subset that didn’t — protecting credibility on the rest.
$1.2M
R&D Addback Successfully Defended
Audit-Ready
Methodology Documentation
+5 Pts
Margin Lift to Adjusted EBITDA
Adjusted EBITDA reflected the actual run-rate operating economics of the business going forward, not the pre-commercialization investment phase. The valuation conversation moved to where it belonged — a SaaS business with proven margins — instead of a debate about historical cost structure.
In Their Words
“The carve-out was the difference between a defensible multiple and a discounted one. CEI made the case on every line item before the buyer asked.”
— Founder & CEO | Confidential Client