LTM EBITDA: How to Calculate It and Why Buyers Use It

LTM EBITDA is the single most important number in private-company M&A pricing, lender underwriting, and sell-side mandates, because LTM EBITDA captures a business as it actually performed over the last four reported quarters rather than over a fiscal year that may have ended six or ten months ago. Buyers, lenders, and credit committees do not care what your audited fiscal year says in isolation. They care what the business looked like as of the most recent close, and the cleanest way to express that is by rolling the trailing four quarters into one number. Every middle-market term sheet we negotiate at CT Acquisitions hinges on this figure, and almost every dispute we mediate during diligence comes down to how it was built.

This guide covers the three calculation methods, the stub-period mechanics that trip up first-year analysts, how pro-forma adjustments are stacked on top, when buyers use it versus NTM EBITDA, the disclosure rules under SEC Regulation G, and how the figure is presented in confidential information memoranda. We also work a full example using quarterly filings so you can build it yourself in Excel.

What LTM EBITDA Means (Plain English)

LTM stands for Last Twelve Months. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Put them together and you have a company’s operating cash earnings, before financing and accounting decisions, across the four most recent reported quarters. Some people call it TTM, for Trailing Twelve Months. The two terms mean the same thing and are used interchangeably by bankers, lenders, and corporate development teams, although TTM is more common at the Big Four accounting firms and LTM dominates in investment banking. Wall Street Prep, Financial Edge, and Breaking Into Wall Street all use the terms as synonyms in their teaching materials.

The point of computing LTM EBITDA, rather than just using last fiscal year EBITDA, is recency. If a company has a December year-end and you are negotiating in September, fiscal year 2025 ended nine months ago. Nine months is a long time for a business to change shape. Customer churn, raw-material inflation, a new product line, a lost contract, or a tuck-in acquisition can move EBITDA fifteen or twenty percent without touching revenue much. LTM rolls in everything that has happened since the last 10-K and gives you a number that is at most one quarter stale. For sell-side mandates we run at CT Acquisitions, the LTM date moves every month, and lender quotes follow it.

EBITDA itself is a non-GAAP measure. The Securities and Exchange Commission made that explicit in Regulation G, adopted under Sarbanes-Oxley in 2003. When a public registrant reports EBITDA in a press release or filing, the SEC requires a reconciliation to the most directly comparable GAAP figure, which the staff has said is net income rather than operating income. Private companies do not file with the SEC, but the underlying logic transfers: any EBITDA figure has to be reconciled back to net income on the income statement, and any adjustments stacked on top must be defensible. For deeper background on the metric itself, our EBITDA meaning explainer walks through each component.

The LTM EBITDA Formula: Three Calculation Methods

There are three calculation paths to the same answer. Which one you use depends on what data you have. All three converge on the same LTM figure when applied correctly. They are not three different definitions. They are three different routes through whatever financial statements happen to be in front of you.

Method 1: Sum the most recent four quarters. When you have quarterly EBITDA for the last four reporting periods, just add them.

LTM EBITDA = Q(n) + Q(n-1) + Q(n-2) + Q(n-3)

Method 2: Roll forward from the last fiscal year using a stub-period adjustment. Take the latest full fiscal year EBITDA, add the year-to-date EBITDA reported in the most recent quarterly filing, and subtract the matching year-to-date EBITDA from the prior year. This is the workhorse method used in public-company comps.

LTM EBITDA = Latest FY EBITDA + Current YTD EBITDA − Prior YTD EBITDA

Method 3: Build LTM EBITDA pro forma after an acquisition or disposition. Start with the seller’s standalone LTM, add the acquired business’s LTM EBITDA (or subtract a divested unit’s contribution), and layer in run-rate synergies or stranded costs that the credit agreement permits. This is where the most expensive arguments happen in diligence, because every dollar of run-rate addback carries an EBITDA multiple of debt capacity and another of equity value.

The arithmetic is trivial. The judgment is in deciding which quarters and which adjustments belong. CFI, Wall Street Prep, and Macabacus all teach the same three-step approach, with slightly different naming conventions.

Calculation Method 1: Add Latest Quarters to Get LTM

Method 1 is the cleanest when you have a full quarterly EBITDA history. Find the four most recent quarters, sum them, and you are done. This is what equity research analysts do when a covered company has just reported Q1, Q2, Q3, and the new Q4 of a fiscal year that just ended. It is also what private-equity associates do when they have monthly management accounts that roll up to quarters.

The mechanical risk is double-counting. If you add Q3 of fiscal year 2025, Q4 of fiscal year 2025, Q1 of fiscal year 2026, and Q2 of fiscal year 2026, you cover twelve months. If you accidentally include Q2 of fiscal year 2025 instead of Q2 of fiscal year 2026, you have fourteen months in some quarters and ten in others, and your LTM is wrong. Sounds obvious. It happens in spreadsheets that have been emailed around fifteen times.

Method 1 is also the method to use when fiscal calendars do not line up. If you are comparing a company with a March year-end to a peer with a December year-end, you cannot rely on either company’s annual report alone. You build LTM ending the same calendar month for both, using each company’s quarterly disclosures, which is the calendarization technique IB Interview Questions covers in their valuation guides. Macabacus walks through the same calendarization mechanic for trading-comp work.

Calculation Method 2: Stub-Period Add-Back / Subtract

Method 2 is the version every banker has burned into their muscle memory. You start with the audited last fiscal year, add what has happened since the fiscal year ended (the current stub period), and subtract what happened in the same span a year earlier (the prior stub period). The two stubs cancel out the part of the prior fiscal year that is now twelve months old, leaving you with a clean rolling twelve-month window.

The formula written out:

LTM EBITDA = Fiscal Year EBITDA + (Current Period YTD EBITDA − Prior-Year Comparable YTD EBITDA)

Example. A target with a December fiscal year-end reports fiscal year 2025 EBITDA of $40 million. In its Q2 2026 10-Q, year-to-date EBITDA through June 30, 2026, is $24 million. The prior-year comparable, year-to-date EBITDA through June 30, 2025, was $19 million. LTM EBITDA as of June 30, 2026, equals $40M + $24M − $19M = $45 million.

The stub-period adjustment is the most error-prone step in LTM construction. Three rules keep it clean. First, the two stubs must match on duration to the day. A six-month current stub demands a six-month prior stub. Second, both stubs must be measured on the same accounting basis. If the prior year used a different revenue-recognition policy, normalize it. Third, the EBITDA inside each stub must be built the same way: same depreciation policy, same lease classification, same treatment of stock-based compensation. The SEC staff Compliance and Disclosure Interpretations on non-GAAP measures emphasize consistency of presentation across periods, and the same logic protects a private-company LTM build from looking sloppy in diligence.

Calculation Method 3: Pro-Forma LTM EBITDA After an Acquisition

Method 3 layers on top of either of the first two. Once you have a clean standalone LTM, you pro-forma it for events that the buyer or lender has agreed to treat as if they had occurred at the start of the period. The classic case is a tuck-in acquisition. If the seller bought a competitor four months before the LTM date, the standalone LTM only captures four months of that acquired entity. The buyer of the parent has to decide whether to credit the full twelve months of the acquired entity as if it had been owned the entire LTM period.

Under ASC 805, public-company acquirers are already required to disclose what revenue and earnings would have looked like had the acquisition occurred at the beginning of the comparable prior annual reporting period. Specifically, ASC 805-10-50-2(h) requires the acquirer to disclose, for material business combinations, the revenue and earnings of the combined entity as though the deal had closed at the start of the comparable prior period. That public-company pro-forma logic is exactly what private credit agreements borrow from when they define EBITDA for covenant purposes.

The standard credit-agreement formulation says EBITDA shall be calculated on a pro-forma basis giving effect to any acquisition or disposition during the period as if it had occurred on the first day of the period. Simpson Thacher’s covenant handbook describes that mechanic line by line, and Sidley Austin covers how private credit deals now use the same pro-forma rules with even broader run-rate addback baskets. The pro-forma machinery is also where contested addbacks live: run-rate synergies, transaction expenses, severance, and “future” cost saves are all stacked into pro-forma LTM EBITDA by sell-side advisors and contested by buy-side diligence.

LTM vs NTM vs Forward EBITDA: When Each One Applies

LTM is backward-looking. NTM, Next Twelve Months, is forward-looking and built off forecasts. Forward EBITDA usually refers to the next calendar year or fiscal year rather than a strict twelve-month roll, although the terms get used loosely. Wall Street Prep draws the cleanest distinction.

The market convention is straightforward. In M&A pricing, LTM dominates because it reflects what actually happened. The buyer is paying for a business based on what it can see in the bank statements, not what it hopes will happen. IB Interview Questions notes that LTM EBITDA is preferred in M&A precisely because actual financials hold more weight than forecasts. Auxo Capital says the same in their TTM EBITDA M&A guide.

In public-equity research, NTM tends to dominate, because the marginal stock buyer is buying tomorrow’s earnings power. Wall Street Prep shows the same comparable set typically trading at lower NTM multiples than LTM multiples, because the forecast EBITDA is higher than trailing.

In debt finance, LTM is mandatory for covenant testing, but the lender will also model an NTM scenario to test that the loan stays inside debt-to-EBITDA covenants over the forecast horizon. Capstone Partners’ middle-market debt finance report walks through how arrangers underwrite both LTM and projected debt capacity when sizing facilities.

In valuation theory, Aswath Damodaran’s NYU dataset publishes EV/EBITDA multiples by sector annually using trailing twelve-month data through the third quarter of the prior year. His Value Multiples teaching note argues that the trailing multiple is more reliable for cross-sectional comparisons, while forward multiples are more relevant for growth-adjusted intrinsic valuation. For a deeper read on how multiples flow into a transaction, see our how investment bankers value a business walkthrough.

Why Buyers and Lenders Prefer LTM EBITDA Over Trailing Annual

Trailing annual EBITDA is what you see in the latest 10-K or audit. It can be up to twelve months stale by the time a deal closes. LTM EBITDA is at most one quarter stale, sometimes one month stale if the seller keeps monthly accounts. That recency is the only reason LTM exists.

For buyers, the case is risk-based. The closer the EBITDA reference period is to the closing date, the smaller the chance that the business has materially changed in ways the purchase price does not reflect. Sellers obviously prefer LTM to settle as far back as possible in good periods and as close as possible to a recent up-month. Buyers want the opposite. Both sides accept LTM as the focal point and then argue inside it about which quarters and which adjustments count. Our how to price a business for sale guide walks through how we negotiate the LTM date with prospective acquirers.

For lenders, the case is contractual. A debt-to-EBITDA covenant tests Total Debt divided by Consolidated EBITDA, and Consolidated EBITDA is defined in the credit agreement to mean the four-quarter trailing period. The private credit deep dive on debt covenants and CredCore’s covenant primer both lay out the standard definition: ratio of Total Indebtedness to Consolidated EBITDA for the period of four consecutive fiscal quarters. The LTM measurement window is built into the contract.

For sellers, LTM EBITDA is the figure that determines the headline number. Most middle-market term sheets quote a purchase price as a multiple of LTM EBITDA. BVR DealStats, the most-cited private-company transaction database, publishes its EBITDA multiples as median selling price over EBITDA on a trailing basis, with the trailing three-quarter rolling average smoothing the index. DealStats reported that selling-price-to-EBITDA multiples eased modestly in late 2025 after a strong Q3, with the most recent quarterly median in the 4.0x to 4.5x range for sub-$10M EBITDA targets and stepping up steadily by size band.

LTM EBITDA Adjustments: One-Time Items, Pro Formas, Run-Rate

Raw LTM EBITDA is almost never the figure that appears on a purchase agreement. The figure that drives valuation is Adjusted LTM EBITDA, which layers normalization adjustments on top of the raw calculation. The categories are well-established and the same on every deal, even if the magnitudes vary.

One-time, non-recurring items. Legal settlements, one-off litigation costs, hurricane damage, a CEO transition, the cost of a failed IT implementation. These get added back if they are genuinely non-recurring, and the standard challenge from the buyer is that “non-recurring” items have a habit of recurring. The Cooley note on Regulation G and Item 10(e) warns that the SEC has flagged repeated “non-recurring” adjustments as potentially misleading.

Owner-related expenses and personal items. In private-company sell-side, owner compensation above market, family members on payroll who do not work in the business, country-club memberships, owner travel, and the like get added back. These are sometimes called “seller’s discretionary earnings” adjustments. For owner-operated businesses, normalization to a market salary often moves EBITDA by ten or fifteen percent.

Pro-forma acquisitions and dispositions. Covered under Method 3 above. A target acquired five months ago contributes only five months to standalone LTM. Pro-forma LTM credits all twelve months as if owned from day one.

Run-rate synergies and cost saves. Sellers will pre-bake synergy expectations into LTM (“we just signed three new contracts that will add $2M of EBITDA on a run-rate basis”). Credit agreements typically permit run-rate addbacks up to a percentage cap (often 20-25% of unadjusted EBITDA) and within a fixed forward window (often 18-24 months). Lexology’s private credit deep dive documents how broadly these baskets have widened in sponsor-led financings.

Transaction expenses. Legal, banking, and accounting fees related to the sale itself are routinely added back, since the buyer does not view them as ongoing costs.

The discipline that separates a clean LTM EBITDA build from a sloppy one is the quality-of-earnings report. A Big Four or independent diligence firm walks every quarter, reconstructs EBITDA from the trial balance, and lists every adjustment with supporting evidence. The QofE report becomes the negotiating document during purchase-price negotiation. For more on the depreciation-and-amortization mechanics that feed EBITDA itself, see our amortization in EBITDA explainer.

Worked Example: Calculating LTM EBITDA From Quarterly Filings

Let’s build LTM EBITDA for a hypothetical target with a December fiscal year-end, walking through Method 2 on real-looking numbers. Assume we are negotiating in October 2026 and we have access to fiscal year 2025 audited financials and the Q1 and Q2 2026 quarterly statements.

Fiscal year 2025 audited (twelve months ended December 31, 2025):

• Revenue: $180,000,000
• Operating income (EBIT): $28,000,000
• Depreciation: $9,000,000
• Amortization: $3,000,000
• EBITDA = $28M + $9M + $3M = $40,000,000

Year-to-date through June 30, 2026 (six months):

• Revenue: $108,000,000
• Operating income: $16,000,000
• Depreciation: $5,000,000
• Amortization: $1,500,000
• EBITDA = $16M + $5M + $1.5M = $22,500,000

Year-to-date through June 30, 2025 (prior-year comparable six months):

• Revenue: $89,000,000
• Operating income: $12,000,000
• Depreciation: $4,500,000
• Amortization: $1,500,000
• EBITDA = $12M + $4.5M + $1.5M = $18,000,000

LTM EBITDA as of June 30, 2026:

$40,000,000 + $22,500,000 − $18,000,000 = $44,500,000

Now layer in adjustments. Assume the quality-of-earnings work identified:

• $1.2M of litigation expenses in Q3 2025 related to a settled IP dispute (non-recurring): add back
• $800K of severance expense from a Q1 2026 reorganization: add back
• $2.5M of owner compensation above a $400K market-rate CEO salary: add back
• $400K of run-rate cost saves from a closed underperforming location, annualized but only six months in LTM: add back $200K to true up
• $600K of one-time transaction-related legal fees: add back

Total normalization adjustments = $1.2M + $0.8M + $2.5M + $0.2M + $0.6M = $5.3M

Adjusted LTM EBITDA = $44.5M + $5.3M = $49.8M

At a 9.0x EV/LTM EBITDA multiple, enterprise value would be $448.2M. At 8.0x, it would be $398.4M. The $50M swing between those two scenarios is what M&A negotiations are fundamentally about. For the bridge from enterprise value to what the seller actually puts in their pocket, see our enterprise value to equity value bridge walkthrough.

LTM EBITDA in M&A Pricing: Multiple Application

Once Adjusted LTM EBITDA is settled, the buyer applies a multiple to derive enterprise value. The multiple is grounded in comparable transactions, public-company trading comps, and the bidder’s own return requirements. BVR DealStats, PitchBook’s LCD, and Capstone Partners all publish quarterly multiple data that bankers reference when justifying a purchase-price multiple.

The 2025-2026 range as we write is approximately as follows, drawn from those three sources and our own deal flow at CT Acquisitions:

• Lower middle market platforms under $10M LTM EBITDA: 5.0x to 7.0x median, with strong businesses fetching 7.5x to 8.0x
• Middle market $10M to $25M LTM EBITDA: 7.0x to 9.0x median
• Core middle market $25M to $100M LTM EBITDA: 9.0x to 11.0x median
• Upper middle market and large-cap $100M-plus LTM EBITDA: 11.0x to 15.0x, with PitchBook reporting median EV/EBITDA of 15.5x for deals over $1B in recent quarters

Sector matters as much as size. Damodaran’s sector data shows software and life sciences sitting at twice the EV/EBITDA of industrials or auto parts. A $20M LTM EBITDA enterprise-software business trades at 12x to 18x routinely. A $20M LTM EBITDA distribution business is closer to 7x. Equidam’s 2026 industry data compiles the same cross-sectional picture.

The other factor is buyer type. Strategic buyers can justify higher multiples because they price in synergies they can extract. Financial buyers, primarily private equity, are constrained by the math of their LBO model: they have to underwrite a target IRR of around 20% over a five-year hold, which limits how much they can pay relative to LTM EBITDA and how much debt they can put on the target. Our LBO model step-by-step guide walks through the underlying mechanics.

LTM EBITDA in Senior Debt Covenants

Lenders write LTM EBITDA into credit agreements with surgical precision because it determines whether the borrower stays in compliance. The standard senior debt-to-EBITDA covenant says Total Debt divided by Consolidated EBITDA cannot exceed a stated multiple, tested quarterly on a four-quarter rolling basis. Senior-debt-to-LTM-EBITDA caps in the 2025-2026 market typically sit between 4.0x and 6.0x depending on the credit, and total debt including subordinated and mezzanine layers reaches 5.5x to 7.5x.

The definition of EBITDA inside the credit agreement is usually fifteen to thirty pages long, with permitted addback categories enumerated. Proskauer’s private credit alert and the Simpson Thacher’s covenant handbook document the standard categories: pro-forma effect for acquisitions and dispositions, run-rate cost savings and synergies (often capped at 20% to 25% of unadjusted EBITDA over an 18-to-24 month forward look), restructuring charges, transaction expenses, stock-based compensation, and unusual or non-recurring items. Sidley Austin’s 2026 update notes that addback baskets have continued to widen in sponsor-led private-credit financings, with some agreements now permitting uncapped run-rate addbacks subject only to certifications by the borrower’s chief financial officer.

The mechanical risk for borrowers is what the Lexology deep dive calls “auto-resets”: debt-to-EBITDA covenants that step down over time, requiring the borrower to pay down debt faster than the business can grow EBITDA. A loan that closes at 6.0x debt-to-EBITDA with a 6.5x covenant has half a turn of headroom on day one. If LTM EBITDA falls 8% and Total Debt is unchanged, the ratio jumps to 6.5x and the covenant trips. This is why LTM EBITDA management, including the cleanliness of addbacks, matters so much for borrower compliance reporting.

LTM EBITDA in Sell-Side Marketing: CIM Presentation Norms

In the Confidential Information Memorandum that we and other sell-side advisors prepare for sale processes, LTM EBITDA is presented in a standardized format that has hardened into a market norm. Every CIM that crosses a buyer’s desk follows roughly the same pattern, and deviation from it is read as either inexperience or evasion.

The standard presentation has four columns: most recent three fiscal years plus LTM. Each column shows revenue, gross profit, operating income, EBITDA, and Adjusted EBITDA, with a clear bridge from EBITDA to Adjusted EBITDA below. The bridge categorizes each addback, with a short narrative explanation and a supporting page reference to the data room. The LTM date is named explicitly in the column header, for example “LTM 6/30/2026.”

The norm is to also include a quarterly trend chart showing the last eight quarters of revenue and EBITDA, so buyers can see whether LTM is being inflated by an unusually strong recent quarter or depressed by a temporary disruption. Sophisticated CIMs include a “normalized run-rate” panel showing LTM as well as Q4 annualized, last-three-months annualized, and the next fiscal year budget side by side. Each one tells a different story, and the buyer’s job is to figure out which one is most representative of the steady-state business.

Per the SEC’s non-GAAP CDIs, public registrants must give equal or greater prominence to GAAP figures, but private-company CIMs are not bound by that rule. In practice, sophisticated sell-side processes still reconcile from GAAP net income to Adjusted LTM EBITDA in a footnote on the financial summary page, because lender credit committees and buyer audit committees expect it.

How CT Acquisitions Builds LTM EBITDA in Sell-Side Mandates

When we run a sell-side mandate at CT Acquisitions, the LTM EBITDA build starts on day one and gets rebuilt every month until close. We follow a sequence that has been refined across hundreds of middle-market transactions.

First, we pull twenty-four months of monthly P&L from the client’s accounting system, reconciled to the most recent audit or review. Twenty-four months gives us two full LTM windows side by side, which lets us see what changed and why.

Second, we calculate raw LTM EBITDA on Method 2, anchored to the most recent fiscal year, with a rolling stub-period update each month. We rebuild it again as Method 1, summing the four most recent quarters, as a check. The two should agree to the dollar. If they do not, the client’s books have a reconciliation issue that needs to be fixed before we go to market.

Third, we layer in normalization adjustments, every one of which is supported by a document in the diligence room: invoices, payroll records, board minutes, settlement agreements, or executed contracts. We have learned that an addback the seller cannot document gets ignored by the buyer, no matter how reasonable it sounds.

Fourth, we engage an independent quality-of-earnings firm to validate the build before the CIM goes out. The QofE costs $30K to $80K and saves several multiples of that in retrade avoidance later. Buyer-side QofE will challenge every adjustment regardless. Seller-side QofE pre-empts the most common challenges.

Fifth, we update LTM monthly through the process and present a refreshed Adjusted LTM EBITDA in every management presentation. Buyers expect the figure to move. They get nervous when it does not, because it suggests the seller is manufacturing a static number rather than running the business.

If you are thinking about selling a business and want a defensible LTM EBITDA build, our team can scope it for you. The first conversation is free and confidential. Pricing on broader engagements is laid out in our business valuation services cost overview.

LTM EBITDA: Frequently Asked Questions

Is LTM EBITDA the same as TTM EBITDA?

Yes. LTM stands for Last Twelve Months and TTM stands for Trailing Twelve Months. The two terms are interchangeable. Investment banks tend to use LTM. Accounting firms and equity research analysts often use TTM. Both refer to the same rolling four-quarter measurement.

How often should LTM EBITDA be recalculated?

For active sell-side processes, monthly. For lender covenant compliance, quarterly. For internal management reporting, monthly or weekly with rolling thirteen-month trends. Any LTM more than one quarter old is considered stale by sophisticated buyers and lenders.

What is the difference between LTM EBITDA and Adjusted LTM EBITDA?

LTM EBITDA is the raw sum of the last four quarters of EBITDA as reported. Adjusted LTM EBITDA layers on normalization adjustments for non-recurring items, owner-related expenses, pro-forma acquisition effects, and run-rate cost saves. Almost every M&A purchase price is expressed as a multiple of Adjusted LTM EBITDA, not raw LTM EBITDA.

Can LTM EBITDA be negative?

Yes. If the trailing four quarters include enough losses, LTM EBITDA can be negative. When this happens, multiples become meaningless and buyers shift to revenue multiples, gross profit multiples, or projected EBITDA at a specified milestone. Sofer Advisors discusses when to use revenue multiples instead of EBITDA multiples for that reason.

How do I calculate LTM EBITDA from a 10-Q?

Take the latest annual 10-K EBITDA, add the year-to-date EBITDA from the most recent 10-Q, and subtract the year-to-date EBITDA from the comparable 10-Q a year earlier. That is Method 2, the stub-period approach. The 10-Q always discloses prior-year comparable figures, which is what makes the subtraction step possible.

What multiple of LTM EBITDA do private companies sell for in 2026?

Median multiples in the lower middle market sit at roughly 5.0x to 7.5x for businesses under $10M of LTM EBITDA. Core middle-market businesses in the $25M to $100M range trade at 9.0x to 11.0x. Industry and growth profile drive most of the variance. BVR DealStats, Capstone Partners, and Damodaran’s NYU dataset are the most reliable published sources.

What is a “pro-forma LTM EBITDA”?

Pro-forma LTM EBITDA adjusts the trailing twelve months to include the full-period effect of acquisitions, dispositions, or other transactions that were only partially captured in the standalone trailing period. Under ASC 805, public-company acquirers must disclose pro-forma figures as if the deal had occurred at the start of the comparable prior period. Private-company credit agreements borrow the same pro-forma logic for covenant testing.

Does the SEC require LTM EBITDA disclosure?

The SEC does not require LTM EBITDA specifically. It does require that any non-GAAP measure presented in a filing, press release, or registration statement be reconciled to the most directly comparable GAAP figure, presented with no greater prominence than the GAAP measure, and free of misleading adjustments. The Regulation G rule release and the SEC staff CDIs govern how EBITDA can be presented. The SEC’s most recent CDI updates were issued December 13, 2022, the first new set since 2018, per the Securities Law Blog summary.

Why do buyers focus on LTM EBITDA instead of last fiscal year EBITDA?

Recency. Last fiscal year EBITDA can be twelve months stale by the time a deal closes. LTM EBITDA is at most one quarter stale, which matches how quickly businesses can change shape and how quickly lender credit committees expect to see updated numbers.

How are run-rate addbacks limited in credit agreements?

Run-rate addbacks are typically capped at a percentage of unadjusted EBITDA, often 20% to 25%, and limited to a forward window of 18 to 24 months from the date the related actions were taken. Proskauer documents the standard formulation. Sidley Austin’s 2026 covenant update notes that some sponsor-friendly agreements now permit uncapped run-rate addbacks subject only to a borrower certification.

If you are preparing to sell your business in the next twelve to thirty-six months, the LTM EBITDA you bring to market is the single biggest lever on the price you receive. Book a confidential call with our team at CT Acquisitions and we will scope a clean LTM build and a quality-of-earnings plan that holds up under buyer diligence.