Consulting & Advisory

Last week, I had two back-to-back calls with business owners.

The first CEO, we’ll call him Jason, joined the call to discuss one final detail in our non-disclosure agreement (NDA). We were on version 10 of revisions, with each back-and-forth reviewed by his attorney. The last open item to nail down was the venue clause, where we agreed that if any dispute arose from our confidentiality, we would resolve them in Wyoming (a location that would be equally inconvenient for both of us).

He hadn’t told a single member of his team about his plans, not even his assistant, CFO, or his son that worked in the business.

My next call with a seller, who we will call Jennifer, couldn’t have been more different. “I don’t believe in NDAs,” she said. “Everyone shares this stuff around anyway; I don’t care. My whole company knows we’re building this to sell.”

Both companies are founder-owned. Both are already worth over $50 million, and both owners have a vision of an eventual $500 million-plus exit. Yet, their views on confidentiality are diametrically opposed.

Why Confidentiality Matters

Jason has legitimate reasons to be worried about confidentiality. If news of a possible sale surfaces prematurely, it can create ripple effects that impact the entire organization. Employees may worry about job security and start polishing up their resumes. Customers can begin to question the stability of the relationship, while competitors may jump at the opportunity to lure business away.

In all of these ways, the protection of information flow can affect the most impactful lever in a sale process: the consistent growth and profitability of your business.

Can Confidentiality Go Too Far?

Jennifer isn’t wrong either. Time kills deals, and NDA negotiations add a lot of time to the process. Professional buyers evaluate a lot of deals. Give them pages of redlines, and they may just throw your opportunity in the bin. 

Buyers also pay up for having a deep management bench that works together with cohesion. Keeping the most key players in the dark about a sale process adds significant risk to a potential ownership transition.

Role Of NDAs

It is absolutely “market standard” to have buyers sign an NDA before receiving the Confidential Information Memorandum (CIM) in a sale. However, we encourage sellers to make their confidentiality agreements “buyer friendly” to encourage a fast turnaround, while operating under the assumption that their information might get leaked. 

How can a business owner get comfortable with the fact that their info might get out? By not sharing in the CIM, anything that could cause damage to the business. If someone wants to spread rumors about you selling the business, they can do that any time they want, even if you’re not selling. 

If the identity or nature of your relationship with your key people, key customers, or key suppliers are part of your “secret sauce”, simply don’t name them in your materials. The purpose of a sale process is to evaluate potential investors for their level interest, their willingness to pay, and their fit with your organization. You can do all of that without giving them your employee roster or a detailed run on sales by customer.

The NDA is there to protect you in the case of blatant abuse of confidentiality that directly hurts your business. It will not protect you from rumor-mongers.

Who to Bring Into the “Inner Circle”

One of the most important decisions in a sale process is deciding who inside your company should be brought into the loop, and when. Telling too few people will slow you down, while telling too many can create anxiety or risk leaks. Start with the people who are essential to the preparation process, such as your CFO, controller, head of operations, or sales leader. Whether your company has these titles formalized or not, the group presenting the business to buyers should be your equivalent of “the C suite”.

Silence or Open Book?

So, what’s the right approach? The silent Jason, or the open-book Jennifer?

As you might guess, we recommend an approach that blends the two. 

	Silence	Open Book
Benefits	§ Reduces the risk of rumors reaching competitors, customers, or employees § Preserves focus within the company while exploring a sale § Provides time to evaluate interest without external pressure	§ Encourages collaboration and speeds up preparation § Gives buyers access to key team members earlier in the process § Reduces thechance of disruption later, since employees are already informed
Drawbacks	§ Can delay the process or frustrate potential buyers § Limits internal involvement, making it harder to prepare information or get support § May signal to buyers that the seller is overly cautious or uncertain	§ Increases the risk of leaks to the market or industry peers § May cause uncertainty or anxiety among staff if the deal doesn’t move forward § Could weaken negotiating leverage if buyers perceive the process as unstructured

Ask The Right Questions

Instead of defaulting to a one-size-fits-all playbook, owners should ask themselves a few key questions:

• Is there any information in my CIM that, if it was leaked, would hurt the business?
• Who on my team really needs to know right now, and who can wait?
• What kind of buyers am I targeting, and how will they expect the process to be run?
• How broad to I want my auction process to be?

The Best Approach Is a Thoughtful One

At Roadmap Advisors, we’ve supported business owners across the spectrum: from carefully managed and hyper confidential negotiations to broad and open processes. The key is not which end of the spectrum you choose. The key is choosing with intention. If you are considering your next steps and want to understand how confidentiality can be actively managed, contact one of our m&a advisors to get started today. Our team is ready to listen, share perspective, and help you move forward when the timing is right.

A skilled M&A advisor plays a critical role in safeguarding sensitive details about your business throughout the sale process. From the earliest conversations to the final closing, protecting confidentiality is essential to preserving your company’s value, reputation, and operational stability. 

At Roadmap Advisors, we take a proactive approach to minimizing risks by controlling how, when, and with whom information is shared. Below are just a few of the key practices we encourage sellers to adopt to help ensure that their transaction proceeds smoothly and securely.

The NDA

Pre-empt The PE Markup

Private equity firms predictably push back on the same few terms in all NDAs, most of them inconsequential. They typically require the right to retain a single copy of confidential information in backup format for regulatory compliance. They also need the ability to share deal information with lenders, lawyers, QoE firms, LPs, etc. (definition of “Representatives”). The definition of Confidential Information should exclude anything already shared or known to the buyer from other sources. There are about a dozen more of these, reach out to us for the latest list.

Pick a Neutral Venue

Unless your business is based in Delaware or New York, expect buyers to ask for a more neutral venue. Choosing one of these states has the benefit of extensive case law and efficient court systems, which can benefit both sides.

Update Your NDA For This Century

Notices should be accepted in email format. “Return” language should be replaced with deletion requirements, as most information is digital anyway.

Limit Non-Solicitation To When It Matters

Solicitation of employees is more of an issue with strategic competitors than with PE firms who don’t operate in your industry. Solicitation of rank-and-file employees outside of management is less of a risk than solicitation of leadership. Expect pushback on non-solicitation clauses, and have a clear understanding of what you’re willing to accept.

The Information Sharing

Limit Your Information Sharing

It is perfectly acceptable to have separate NDAs for PE and competitors. It is also fine to prepare two different CIMs: one for financial buyers, and one for competitors. You don’t have to share everything with everyone up front. Work with your advisor to create stages of information sharing and gauge who is serious before disclosing sensitive details.

Use Staged Information Releases

Release only the information necessary for each phase of the process. Start with a high-level “teaser,” then provide a more detailed CIM once serious intent and fit are confirmed by your investment banker and the counterparty has signed an NDA. Hold back sensitive customer names, pricing details, or proprietary processes until later in diligence when trust is higher and the deal is more likely to close.

Keep Your Process Tight

Work with your investment banker to prepare all materials in advance and keep your process on a defined, short timeline. A company that is “in market” for 12 months is more likely to suffer from information leaks. An experienced M&A advisor can manage outreach and qualification of counterparties to limit how long your information remains in circulation.

The Deal Team

Leverage Your Advisor

Confidentiality is easier to maintain when you have an experienced advisor controlling the flow of information. Your banker can field early inquiries, manage NDAs, and serve as gatekeeper so you’re not juggling buyer conversations and risking unguarded disclosures.

Choose Who’s In The Loop

Decide in advance which members of your team will know about the sale process and when they will be informed. Start with essential personnel like your CFO and COO. Develop a thoughtful communication plan to explain the need for confidentiality.

Keep Meetings Confidential

Be mindful of what appears on your company calendar and who visits your location. When possible, conduct management meetings off-site. Keep company tours to a minimum, and design them in a way that avoids raising employee suspicion.

The Counterparty

Don’t Engage With The Wrong Buyers

Got a bad feeling about a potential buyer? Does a buyer have a reputation for unethical behavior? Trust your gut. If including a direct competitor that has previously stolen business or employees makes you uncomfortable, you don’t have to involve them.

Ask About Their Process

A serious buyer should have a well-defined process for protecting your information. If it’s a large strategy, who in the organization will see the data? If it’s a financial investor, who will they share the CIM with? Will they need to fundraise externally, which could require sharing your information more broadly? Review the definition of “representatives” in your NDA to ensure you’re comfortable with its scope.

Protect Confidentiality During Your Business Sale

Maintaining confidentiality throughout the sale of your business is key to safeguarding its value and avoiding unnecessary disruption. By taking the right steps, you can better control the flow of information and reduce the risk of damaging leaks. If you are preparing for a sale, speak with the Roadmap Advisors team to develop a strategy that protects your interests from the very beginning.

EBITDA has become a widely used metric in business and investing circles, yet it’s often misunderstood or misused. Short for earnings before interest, taxes, depreciation, and amortization, EBITDA aims to reflect a company’s core operating performance. It’s frequently cited in dealmaking, private equity, and financial reporting, but its popularity can mask some real limitations.

In this article, we break down what EBITDA really means, how it differs from similar metrics, why investors rely on it, and where caution is warranted.

What EBITDA Really Means

EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It offers a snapshot of a company’s operational performance, stripped of financial structure and accounting choices. The idea is to isolate profit generated through normal business activity, without the noise of financing decisions, local tax rules, or large non-cash charges.

To calculate EBITDA, analysts usually start with net income and add back interest expense, tax expense, depreciation, and amortization. Some prefer starting with EBIT (earnings before interest and taxes) and then adding depreciation and amortization from there. 

Either method leads to the same place: a figure that gives an idea of recurring operational earnings before non-operating or accounting-driven items come into play.

How EBITDA Differs From EBIT & Operating Income

While EBITDA and EBIT are often mentioned together, they are not interchangeable. EBIT stops after removing interest and taxes from net income, leaving depreciation and amortization untouched. EBITDA goes further by removing those as well, which often leads to a larger number, especially for companies with significant fixed assets.

For companies with heavy capital investment, such as telecom providers or energy infrastructure firms, EBITDA can look much stronger than EBIT. It can create a more favorable image of profitability, even though those non-cash expenses represent real long-term costs tied to equipment and assets.

Why Investors Focus On EBITDA

EBITDA remains popular because it smooths out differences that can make comparing businesses difficult. Interest expense depends on a company’s financing choices, which vary widely. Some companies carry significant debt; others stay nearly debt-free. EBITDA removes this variable, which can help investors compare operational efficiency across different capital structures.

Tax expense is another factor that varies by location, regulation, and specific tax credits or deductions. Stripping out taxes offers a clearer view of how a business performs before jurisdictional differences come into play. Depreciation and amortization are non-cash expenses, often tied to past investment decisions or intangible assets. While EBITDA excludes non-cash charges, it does not account for working capital changes or capital expenditures, making it a rough estimate of operational performance, not actual cash flow. Because of these qualities, EBITDA often plays a role in debt agreements, especially when setting performance covenants. 

It also serves as the denominator in common valuation multiples like EV/EBITDA, which compares enterprise value to operational performance. In stable industries, 8 to 10 times EBITDA is often cited as a fair range. Growth sectors like SaaS can see multiples as high as 14 to 18 times, depending on market conditions and expectations.

Where EBITDA Can Mislead

Despite its usefulness, EBITDA has received its share of criticism. Some have criticized that removing depreciation and amortization ignores the real cash costs of maintaining and replacing business assets.

Asset-heavy businesses often show strong EBITDA while still bleeding cash. Airlines, for instance, may report a positive EBITDA figure even during years when their capital expenditures far exceed their cash from operations.

Adjusted EBITDA is another metric that often raises questions; companies often modify the standard EBITDA calculation by adding back items they label as non-recurring. Some of these adjustments are reasonable. One-time restructuring costs, disaster-related losses, or asset impairments can distort a company’s normal earnings, so excluding them helps clarify the core picture.

Others, though, are more questionable. Various factors such as ongoing legal fees, stock-based compensation, and regular rent adjustments appear frequently in SEC comment letters, flagged as inappropriate if presented as “non-recurring.”

In M&A, adjusted EBITDA plays a key role in purchase price negotiations and is often the basis for valuation, earn-outs, or debt covenant compliance. Because of this, both buyers and sellers must carefully vet what counts as an “adjustment.”

The SEC has increased its scrutiny of these adjustments, noting in a 2024 review that nearly 30% of comment letters involved concerns with non-GAAP metrics like adjusted EBITDA. While SEC scrutiny primarily affects public companies, private company sellers preparing for a sale should still follow best practices in labeling and justifying adjustments to avoid valuation disputes.

EBITDA Margin Shows Efficiency

EBITDA margin is calculated by dividing EBITDA by total revenue, revealing how much profit is produced per dollar of revenue, before factoring in interest, taxes, or depreciation.

Margins can vary widely between sectors. Industrial REITs often report margins north of 70% due to steady rental income and low overhead. At the other extreme, early-stage biotech firms can post negative margins, sometimes reaching negative 100% or more, as they spend heavily on R&D without matching revenue.

Charts or heat maps that show average EBITDA margins by sector can help readers benchmark their own company’s performance or assess how an acquisition target stacks up.

What To Take Away From EBITDA

EBITDA is a widely used tool in financial analysis, offering a clearer look at operational earnings across industries and business models. It strips away many of the variables that complicate comparison, which makes it appealing to investors, lenders, and business owners alike.

Still, its usefulness depends on how well it’s applied. To truly understand these metrics, you need to consider the bigger picture. If you’re considering a business sale, planning an acquisition, or evaluating investment opportunities, a strong grasp of EBITDA is just the starting point. Roadmap Advisors works with business owners, investors, and family offices to provide transaction insight backed by real-world experience.

To learn more, connect with our experienced M&A Advisors by scheduling a consultation online today.