What this week's acquisitions tell owners about recurring revenue, normalised EBITDA and the multiple you will actually be offered
How contracted revenue and normalised EBITDA set the multiple, explained through the transactions we tracked in the week to 4 September 2026.
Published 4 September 2026. Written and reviewed by Joe Lewin, Founder and Managing Director, DealFlowAgent. This piece reads across the transactions covered in our building services and TIC watch and healthcare watch for the week to 4 September 2026.
Key takeaways
- Price equals earnings multiplied by a multiple, and both halves of that are decided by the buyer, not by you. Most owners spend their energy on the first half and lose their money on the second.
- Normalised, or adjusted, EBITDA is the buyer's restatement of your profit: your owner's remuneration replaced with a market-rate salary, genuinely one-off costs removed, and anything the business would still incur after you leave added straight back.
- Contracted, mandated, renewing revenue lifts the multiple because it reduces the buyer's forecast risk. Every sub-sector that transacted this week, from fire suppression to care homes to outsourced pharmacy services, shares that characteristic.
- Adjustments only survive with evidence. An add-back you can prove with an invoice, a contract or a payroll record is accepted. An add-back you can only assert is deleted, and it is deleted after being multiplied.
- The highest-return work available to most owners is not growth. It is converting discretionary revenue to contracted revenue, and building a management layer so the buyer is not acquiring your diary.
Deal price in one line
Enterprise value is normalised EBITDA multiplied by a multiple. Normalised EBITDA is what a buyer believes the business earns without you in it. The multiple is what that buyer will pay per pound of those earnings, and it is set almost entirely by how confident they are the earnings will still be there next year.
Owners tend to negotiate hard on the multiple and hand over the earnings figure without argument. That is backwards. A single unaccepted add-back of GBP 100,000 at a multiple of six costs GBP 600,000. There is rarely a negotiating win of that size available anywhere else in a process.
What is normalised EBITDA, and why is it lower than my accountant's number?
Normalised EBITDA is your earnings before interest, tax, depreciation and amortisation, restated to show what the business would earn under a new owner. It is not a tidier version of your accounts. It is a different question being asked of the same data, and the answer is usually below the number you have in your head.
The restatement typically covers:
Owner remuneration. Whatever you pay yourself is replaced with the market cost of employing someone to do your job. If you take GBP 60,000 and the role is worth GBP 110,000, EBITDA falls by GBP 50,000. If you take GBP 300,000 for a role worth GBP 110,000, it rises.
Genuinely one-off items. A single legal dispute, a one-time system implementation, a relocation. These come out, if you can evidence that they will not recur.
Non-business costs. Personal vehicles, family members on payroll who do not work in the business, personal travel. These come out, and they need documentation, not explanation.
Run-rate adjustments. A contract that started in month nine can sometimes be annualised. Buyers accept this less readily than owners expect, and almost never without a signed contract and a delivery history behind it.
Additions the other way. Costs you have deferred that the buyer will have to bear. Deferred maintenance, under-investment in vehicles or systems, a role you have left unfilled for a year. These reduce the figure, and a competent buyer will find every one of them.
The practical rule: an adjustment survives if it can be evidenced from a document. If the only support is your recollection, assume it will be removed. Assemble the evidence file before anyone asks, because retrofitting justifications during diligence reads exactly like what it is.
Related reading: valuation guides index, exit readiness.
How does recurring revenue change the multiple?
It changes the buyer's forecast risk, and the multiple is a price on that risk. When a buyer can see contracted revenue that renews without a sales cycle, less of next year's earnings has to be won again. That directly widens what they can pay while still hitting their own return requirement.
Look at what actually transacted this week. Fire suppression servicing. Extinguisher and detection inspection. Testing, inspection and certification. Compliance screening. Bridge inspection. Contracted waste routes. Scheduled pest control. Care home occupancy. Outsourced pharmacy services. Every one of those is revenue the customer cannot simply defer, either because a regulation requires it, a contract commits it, or a resident lives there.
Now separate the concepts owners often merge:
Recurring revenue repeats without a new decision. A service contract with automatic renewal.
Repeat revenue comes back but requires a fresh decision each time. A loyal customer who calls you every spring.
Mandated revenue is required by someone other than the buyer of the service. Statutory inspection is the clearest example, and it is the most defensible of the three.
Buyers price them differently, in that order, worst to best. Two businesses with identical EBITDA where one is project-led and the other is contracted and mandated do not receive the same offer, and the gap is usually large.
The specific things a buyer will examine:
- What percentage of revenue is under contract, measured over the last three years rather than today
- Weighted average remaining contract length
- Renewal rate, and whether renewal is automatic or requires a signature
- Customer concentration, with the top five as a percentage of revenue
- Whether contracts survive a change of control, which is a legal question worth asking your solicitor before, not during, a process
- Price escalation mechanisms, and whether you have actually applied them
If you want to know how this plays out in your own sub-sector, our guides set out the drivers behind the ranges: fire and life safety, compliance, testing and inspection, maintenance contracts, HVAC, electrical, waste management, care homes, dental practices.
What else moved the needle in this week's transactions?
Beyond contracted revenue, four characteristics recur across the businesses acquired in both watch articles this week. None of them is quick to fix, which is precisely why they are worth starting on now rather than in the quarter you decide to sell.
A workforce that stays. Mechanical, electrical, fire and clinical buyers are all acquiring people. Engineer and clinician retention, subcontractor or agency dependency, vacancy rates and apprenticeship pipelines are diligence subjects, and they are read as forward risk rather than as HR detail.
Accreditation and registration. Accreditations in building services and registration categories in healthcare both take time and money for a buyer to build organically. That is why they are part of the asset. Formalising a specialism you already deliver can widen the set of buyers able to bid.
Systemised operations. Job management, asset registers, certificate and renewal tracking, clinical records, rotas. If it exports cleanly, diligence is shorter and cheaper and the risk discount narrows. If it lives across paper and spreadsheets, the buyer prices the uncertainty.
Low owner dependency. If the technical judgement, key relationships and pricing decisions sit only with you, the buyer is acquiring a job. Every additional layer of management between you and the daily operation moves the business from a job toward an asset.
What should an owner do about this in the next ninety days?
Pick the two changes with the longest lead time and start them now, because both contract conversion and management depth take four to eight quarters to show up in the evidence a buyer will accept. Nothing here requires you to have decided to sell.
- Measure your contracted percentage properly, over three years, and write the number down.
- Take your ten largest discretionary customers and offer each a scheduled service agreement.
- Check whether your contracts survive a change of control.
- Build the add-back evidence file now, one folder, one line per adjustment, document attached.
- Name a deputy for the two functions that only you perform, and give them the decisions.
- Fix your data. One system, clean history, exportable.
Then get an outside read on where that leaves you. Our free valuation report assesses thirty factors across finance, people, operations, account management and growth, gives you an indicative range with the reasoning, and tells you which specific factors are holding your number down. It is built by our team, human-reviewed, and there is no obligation attached to it. We do not contact a single acquirer about your business unless and until you give us a written mandate.
Related guides and sector pages
Valuation guides: full index, fire and life safety, compliance, testing and inspection, HVAC, electrical, maintenance contracts, waste management, passive fire protection, security systems, plumbing and drainage, pest control, heat pumps, care homes, dental practices.
Sectors: building services and facilities management, testing, inspection and certification, fire safety, water hygiene, HVAC, healthcare.
Owner resources: who is buying, exit planning, exit readiness, already approached by a buyer, our approach.
Frequently asked questions
Is now a good time to sell my business?
It depends far more on your contract quality, staffing stability and regulatory position than on the calendar. Buyers transacted in every week of this year across both building services and healthcare. Selling from strength produces a better outcome than selling in response to an event, and a business that is not yet ready is usually worth more in eighteen months than it is today.
What is a normal EBITDA multiple for my sector?
There is a range, and it is wide, because the multiple is set by the characteristics of the individual business far more than by the sector label. Contracted revenue percentage, customer concentration, owner dependency and workforce stability move it more than the industry you sit in. Our sector guides set out the drivers rather than promising a single number.
Do buyers really remove my add-backs?
They remove the ones you cannot evidence. Adjustments supported by invoices, contracts or payroll records are generally accepted. Adjustments supported only by explanation are generally deleted, and the deletion is multiplied, which is why the evidence file is worth building before anyone asks for it.
How long does it take to improve a valuation?
Contract conversion and management depth typically need four to eight quarters before they show as evidence a buyer will underwrite. Data quality and the add-back evidence file can be improved in weeks. That is why we suggest starting the slow items first.
What is the difference between recurring and mandated revenue?
Recurring revenue renews without a new customer decision. Mandated revenue is required by a regulation or statutory obligation, so the customer cannot decline it without a consequence. Mandated is the more defensible of the two and is priced accordingly, which is one reason inspection and compliance businesses attract strong buyer interest.
Will you contact buyers if I request a valuation report?
No. We map likely acquirers from our own registered network without contacting anyone. No acquirer hears your company's name until you have signed a mandate and given written permission.
Methodology and disclosure
This article contains no external citations because it makes no external factual claims. It reads across the transactions verified and cited in our two Acquisition Watch articles for the week to 4 September 2026, both linked at the top, where every source is listed and was HTTP-checked at the time of publication. The valuation mechanics described are standard practice in lower middle market M&A and are described in general terms. No multiple ranges, deal values or outcomes are asserted here.
Nothing in this article is investment, financial, tax or legal advice. Any valuation of a specific business requires an assessment of that business.
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