The EBITDA Paradox

Why short-term focus erodes long-term value

When EBITDA becomes the only thing that matters, a self-destructive cycle kicks in.

What drives numbers up in the short term often chips away at the very foundations that create real, lasting value. You see this all the time in acquisitions: the culture that made a company successful gets “professionalized” or toned down — and with it, the core engine of performance disappears.

EBITDA is often the go-to metric for shareholders. Especially when a sale is on the horizon, it becomes the holy grail. And fair enough: it’s clear, comparable, and the multiple on EBITDA determines what ends up on the table.

But that fixation can backfire.

When everything starts revolving around EBITDA, the culture that enabled growth in the first place often gets pushed aside. I’ve seen it happen in organization after organization. The numbers may rise for a while… and then quietly start to decline.

When EBITDA Eats Its Own Tail

Years ago, I was advising the acquisition of a family-owned business as a corporate banker. The founder had built it from the ground up, fueled by instinct and entrepreneurial drive. Deals, even across the Middle East, were sealed with a handshake. Trust was the currency.

Then a global private equity firm stepped in. To them, it looked like a goldmine: a five-to-seven-year exit with exceptional returns. The EBITDA multiple they paid showed just how confident they were about future profits.

But once in control, the new managers replaced intuition with tight contracts and airtight processes. The push for “professionalization”, designed to accelerate EBITDA, stripped the soul out of the company.

Within six months, the numbers started to drop. Ironically, the obsessive focus on EBITDA destroyed the very culture that had made it so strong to begin with. I watched it unfold — the banker who had helped finance the deal — as the celebration gave way to quarterly crisis meetings.

Implications for Leaders and Shareholders

For leaders: Stand firm in your values — especially when financial pressure rises. Spell out the link between culture and performance, so shareholders understand that culture drives returns.

For shareholders: Culture is strategic capital. Reducing value to EBITDA alone is short-sighted — and ultimately undermines the performance you’re trying to maximize.

For both: Trust is the bridge between ambition and execution. No trust means no engagement. And without engagement, there’s no sustainable profit.

EBITDA says a lot about performance — but never the whole story.

When financial pressure crushes culture, the foundation for value creation disappears.

That’s the real paradox: by obsessively managing for EBITDA, leaders and shareholders often end up destroying the very conditions that make EBITDA possible in the first place.