Adjusting Financial Statements When Selling an iGaming Business

The short answer

Adjusting, or recasting, financial statements means restating reported profit to show what the business earns for a new owner. You add back costs that will not continue, such as owner perks or a one-off legal bill, and deduct costs the accounts miss, such as unpaid commissions or a below-market salary. The result is normalised SDE or EBITDA, the figure a buyer multiplies to reach a price.

Every euro of genuine add-back is worth several euros of price, because it is multiplied. That is also why buyers test every adjustment. A short list of well-evidenced add-backs is worth more than a long list a buyer rejects, because rejected add-backs make buyers doubt the rest of the numbers.

The main types of adjustment

1. Owner compensation. Replace what the owner actually takes with the market cost of someone to do the owner’s job. If the owner pays themselves EUR 150,000 and a manager would cost EUR 70,000, add back EUR 80,000. If the owner works unpaid, deduct the cost of a manager.
2. Personal expenses. Costs that benefit the owner rather than the business, such as a personal car, family travel or non-business subscriptions.
3. One-off items. Costs or income that will not recur: a settled dispute, a platform migration, a licence application, a one-time sponsorship.
4. Non-operating items. Interest, investment income, currency or crypto revaluation gains and losses, and gains on selling assets.
5. Related-party transactions. Services bought from or sold to companies the owner controls, restated to market prices.
6. Run-rate changes. Changes already made that the trailing figures do not fully show, such as a cheaper platform contract signed six months ago. Buyers accept these only with signed evidence.
7. Allocations. For owners with several brands in one company, a fair share of shared costs charged to the business being sold.

The first five are standard. The last two need the most evidence, because they rest on a judgement rather than a single invoice.

iGaming add-backs buyers accept, question or reject

The pattern is simple. An add-back is accepted when it is non-recurring or owner-specific and backed by a document. It is rejected when the cost is something the business needs to keep earning.

Adjustments that reduce earnings

Sellers prepare add-backs. Buyers prepare deductions. Making these yourself first shows you understand the business, and stops a buyer finding them and questioning everything else.

• Affiliate commissions owed but not yet booked, especially revenue share on players acquired months ago
• Gaming taxes that should have been provided for, including new rates in a market
• A below-market owner salary, or work done by family members for free, which a new owner would have to pay for
• Platform or provider fees that rise at higher volumes or under a contract that is about to renew
• Unusually high sportsbook margin in the trailing period, normalised to a longer-term average
• Bonus cost cut just before the sale, restored to its normal level
• Revenue from test or internal accounts
• Expiring fixed-fee deals on an affiliate site, if a listing deal is ending and will not renew

The QofE guide explains how an independent accountant tests both sides.

How adjustments move the price

The figures below are illustrative, and the 3.0x multiple is chosen only to show the arithmetic. Real multiples depend on the asset, its licence, its trend and its risks.

An affiliate portfolio shows reported profit of EUR 200,000 for the trailing 12 months. The seller proposes four adjustments.

The difference in earnings is EUR 40,000. At 3.0x, it is EUR 120,000 of price. The seller would have been better off presenting EUR 225,000 from the start: the buyer would have trusted the figure, and the deal would not have been renegotiated in diligence.

Documenting adjustments so they survive diligence

For each adjustment, prepare one line in an adjustments schedule and one folder of evidence.

• Description. What the cost or income was, in one sentence
• Amount by month. Not just a yearly total, so it ties to the monthly P&L
• Reason. Why it will not continue, or why the accounts understate a cost
• Evidence. Invoices, contracts, bank entries or a market benchmark for salaries
• Who confirmed it. Your accountant’s review, where you have one

Three rules keep the schedule credible:

1. Be consistent. If an item is added back in one year, treat similar items the same way in other years.
2. Include the deductions. A schedule that only ever increases earnings looks like advocacy, not analysis.
3. Use the same figures everywhere. The adjustments in the valuation, the CIM and the data room must match exactly.

If you are not sure whether an adjustment will hold, leave it out of the headline figure and mention it separately. A buyer who discovers an extra item in your favour is pleased; a buyer who removes one becomes suspicious.

FAQ

What are add-backs when selling a business?

Costs in the accounts that a new owner will not have, such as excess owner pay, personal expenses or one-off costs. Adding them back gives normalised earnings.

What is the difference between adjusted EBITDA and SDE?

SDE adds back all of the owner’s pay and benefits, so it measures what one owner-operator earns. Adjusted EBITDA replaces the owner’s pay with the market cost of a manager, so it measures what an investor earns. See our SDE guide.

Can I add back marketing costs?

Only if the spend was genuinely one-off and revenue does not depend on it. Ongoing acquisition, content and link-building costs are operating costs.

Can I add back bonus costs?

Rarely. Buyers treat bonus spend as part of keeping players. If bonuses were unusually high in a specific, documented campaign, explain it, but expect resistance.

How many add-backs are too many?

There is no fixed number. What matters is that each one has a reason and evidence. A long list of small, weakly supported items reduces trust in the figure.

Who checks the adjustments?

The buyer, its accountant, and sometimes an independent quality of earnings review. Having your own accountant review them first reduces surprises.

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