Quality of earnings for events and the adjustments that get contested

The seller's adjusted EBITDA is 6.4 million pounds. Your accountants come back at 5.18 million. Nobody has found a fraud and nobody is being unreasonable. The gap is 1.22 million, which at ten times is 12.2 million pounds of enterprise value, and it is made of six arguments about what counts.

Quality of earnings for events is a different exercise from the same work on a manufacturer, because an event business has a structural feature almost nothing else has. Its revenue arrives in discrete lumps tied to dates, those dates are moveable, and the accounting period does not care. Everything else on the contested list follows from that.

What a quality of earnings exercise is actually arguing about

Three questions, asked line by line over the trailing period.

Did this revenue relate to the period it was booked in. Will it happen again. Would it still happen under a different owner with a normal cost base.

A seller's adjusted EBITDA answers those three with a set of choices, and the choices are usually defensible individually. The buyer's version answers them differently and is also defensible. What resolves the argument is source records, which is why the exercise starts with the exhibitor booking file, the sponsorship schedule and the edition calendar from the event business data room checklist rather than with the management accounts.

Edition timing, the biggest one and the least discussed

Take a show that has always run in early December, in a business with a 31 December year end. The 2024 edition ran on 3 December 2024. The 2025 edition was moved to 14 January 2026, because the venue had a conflict.

Financial year 2025 now contains no edition of that show. Reported EBITDA for the group falls from 5.4 million to 3.8 million, and the show contributed 1.6 million. Financial year 2026 contains the January edition and looks normal again at 5.5 million.

Normalising is straightforward as long as you say what you did. Attribute each edition to a cycle rather than to a year: 5.4, then 5.4 once the missing edition is added back, then 5.5. The business did not change.

The trap sits one step further on. If the December slot is restored, financial year 2026 contains two editions, January and December, and reports something like 7.1 million. A buyer working from a trailing twelve month figure through 30 June 2026 catches the January edition and misses both Decembers, and a buyer working through 31 December 2026 catches two editions in twelve months. Both windows are honest arithmetic on dishonest boundaries.

Ask for the edition calendar with actual dates run for every edition over the period, and rebuild the earnings series edition by edition before you look at any annual figure. Where a portfolio also contains shows on a two year cycle, the same problem takes a different shape and needs biennial show normalisation instead.

Barter, and why rate card valuation flatters everybody

Event businesses trade space for things. Media coverage from a trade title, endorsement from an association, a speaker programme delivered in exchange for a stand.

The convention is to book the space at rate card as revenue and to book a matching cost, or sometimes no cost at all. On one show, 640 square metres of bartered space at a 395 pound rate card came through as 252,800 pounds of revenue. The media actually received, valued at what the organiser would have paid an agency for equivalent placement, was about 61,000 pounds.

So 191,800 pounds of revenue existed only because both sides agreed to call the space full price. Revenue is overstated, margin is overstated more, and the effect compounds when the barter share grows because the sales team is short of the target.

Ask for the barter register, the deliverable against each line, and evidence of what the deliverable was worth. Then restate. Sellers argue that the space had no marginal cost so the revenue is real, and that argument is wrong in the only way that matters: a buyer cannot sell that space again to a paying exhibitor next year without losing the media.

The adjustments a seller proposes and a buyer resists

Four recur.

Pro forma price increases. A rate rise announced but not yet realised, added to EBITDA as though it were banked. Historic pass-through rates on the same show are the only evidence worth accepting, and they are rarely 100 per cent.

Owner remuneration. A founder paying themselves below market makes EBITDA look better than a buyer can replicate. Restating a 120,000 pound founder salary to a 185,000 pound market show director costs 65,000 pounds. Sellers propose this adjustment in the other direction far more often than in this one.

Related party rent and services. A venue, an office or a services company owned by the same family, charging below market. Every one of those becomes a market rate on completion.

Non-recurring sponsorship. A three year title sponsorship in its final year, or a government pavilion funded by a programme that has ended. Both are real revenue and neither is a base.

Building the bridge, line by line

Present it as a bridge, in that order, so the seller can argue with individual lines rather than the total.

Seller's adjusted EBITDA, 6.40 million. Remove non-recurring sponsorship in its final year, 0.35 million. Remove barter overstatement, 0.19 million. Add back genuinely one off legal costs from a dispute now settled, 0.12 million. Restate founder remuneration to market, 0.07 million. Remove the pro forma price increase, 0.42 million. Restate related party rent to market, 0.31 million.

That lands at 5.18 million, which is 19.1 per cent below the starting figure. At ten times, the bridge is worth 12.2 million pounds of enterprise value, and every line of it is a document request rather than an opinion.

How much does the adjustment column matter?

More than most buyers expect, and listed organisers publish the evidence themselves.

Informa's 2025 full year results, released on 12 March 2026, reported statutory operating profit of 141.7 million pounds against adjusted operating profit of 1,139.8 million on revenue of 4,041.4 million. The adjusted figure is roughly eight times the statutory one. Informa explains the gap as higher intangible amortisation plus a previously reported non-cash impairment of Informa TechTarget, which is a perfectly ordinary explanation, and the size of the column is the point. On a private target with no auditor pushing back, an adjustment column of that relative scale would be nobody's idea of a checked number.

Emerald Holding, reporting full year 2025 on 13 March 2026, defines Adjusted EBITDA as net income or loss before interest, taxes, depreciation and amortisation, stock based compensation, goodwill and intangible impairment charges, and "other items that management believes are not part of our core operations". That last clause is where every quality of earnings argument in this sector actually happens, and a listed company at least has to say so in writing.

Who is signing the numbers?

The identity of the auditor turns out to be worth money, which is a useful thing to know when you are deciding how much reconstruction work to fund.

De Franco, Gavious, Jin and Richardson (Contemporary Accounting Research, 2011) studied US private company sales and found a measurable effect on proceeds. For a representative private stock purchase target with median enterprise value between 14 and 18 million dollars, not having hired a Big 4 auditor was associated with an enterprise value reduction of between 2.0 and 5.2 million dollars, with a similar magnitude on asset purchases. They read it as a partial explanation for the private company discount that runs through information quality facing the buyer.

Read from the buy side, that says the discount you apply for weak assurance is a normal market outcome. It also says the reconstruction work has a return: every line you can verify from source records is a line you no longer have to discount.

Where this stops

A quality of earnings exercise establishes what the business earned. It says very little about what it will earn, and the difference is larger for events than for most sectors.

An event's next edition depends on decisions that have already been made and are not in the accounts. Whether the anchor exhibitors have signed for next year. Whether the venue is booked and at what rate. Whether the show director is staying. A clean quality of earnings report on a show whose top five exhibitors are all out of contract is a precise measurement of something that may not repeat, and the concentration work in revenue concentration analysis is the check that stops a good report from being read as a guarantee.

The second limit is that normalisation is a judgement dressed as arithmetic. Adding back a missing edition assumes the edition would have performed like its neighbours. Restating owner pay assumes you know the market rate for that role in that city. Both assumptions are reasonable and both are assumptions, so state them next to the numbers instead of burying them in a workings tab.

Start with the edition calendar. List every edition of every show in the portfolio with the date it actually ran, then mark which accounting period each one landed in. If any period contains two editions of the same show or none, the earnings series in the pack needs rebuilding before your synergy and integration model uses it.