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Definition - What does TTM EBITDA mean?

TTM EBITDA refers to a company's EBITDA over the trailing twelve months (TTM) of operations. This is a key financial measure that most buyers consider when conducting the valuation of a company. Since transactions can be completed at any point during the year, reviewing the trailing twelve months provides the most complete picture of past operating performance.

This financial measure is most applicable for companies that have stable results or are growing at a reasonable pace where the trailing twelve months can be representative of future performance. For companies in high growth industries or in acquisition mode, calculating the next twelve months (NTM) EBITDA would be more relevant for valuation purposes.

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Divestopedia explains TTM EBITDA

The TTM EBITDA is very often computed on a proforma basis particularly for companies that have experienced a catalyst such as the introduction of a new product or an acquisition. The proforma TTM EBITDA would show what EBITDA would have been for the last 12 months including the trailing twelve months impact of the catalyst.

For example, Company A delivered $20M of EBITDA during the last 12 months. Three months ago, Company B with a standalone TTM EBITDA of $5M was acquired by Company A. A buyer considering Company A for an acquisition would calculate the combined proforma TTM EBITDA which would be the sum of A and B or $25 million. The computed enterprise value (EV) for the combined entity would then be applied go the proforma TTM EBITDA to compute the TTM EV/EBITDA multiple.

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