OPEX (Operating Expenses) are the recurring operating costs a company needs to run day to day: payroll, rent, utilities, marketing or maintenance. It contrasts with CAPEX, investment in long-lived assets.
Few acronyms appear as often in company analysis as OPEX and CAPEX. Understanding the difference — and where the boundary sits — is essential to interpreting EBITDA, calculating real cash flow and anticipating the questions any buyer will ask during due diligence.
OPEX stands for Operating Expenses: the recurring operating costs a company needs to function day to day. It includes, among others:
These costs are consumed within the financial year and recognised in full in that year’s profit and loss account.
CAPEX (Capital Expenditures) is investment in assets with a useful life beyond one year: machinery, vehicles, facilities, software, improvement works. It does not hit the year’s P&L in full: it is capitalised on the balance sheet and transferred to the P&L gradually through depreciation.
OPEX → expense of the year → reduces EBITDA
CAPEX → capitalised investment → does not affect EBITDA (only via depreciation, which EBITDA excludes)This asymmetry has a direct valuation consequence: the boundary between OPEX and CAPEX changes EBITDA. A company that capitalises recurring maintenance as CAPEX is inflating its EBITDA. At a 6x multiple, every €100,000 reclassified represents €600,000 of apparent valuation.
In financial due diligence, OPEX analysis pursues three objectives:
Verifying that EBITDA is sustainable. The buyer checks that all necessary operating costs are provisioned at market levels: management salaries, rents on related-party properties, real asset maintenance. Artificially low OPEX produces an EBITDA the buyer cannot replicate.
Detecting aggressive reclassifications. Recurring costs capitalised as investment (minor IT developments, large repairs, personnel costs capitalised into projects) are reclassified to OPEX, adjusting EBITDA downwards.
Projecting the future cost structure. The split between fixed and variable OPEX determines the operating leverage of the business: how much profit falls if sales fall. Companies with mostly variable OPEX weather cycles better and tend to deserve higher multiples.
An industrial company reports EBITDA of €2,000,000. Due diligence finds:
| Finding | EBITDA adjustment |
|---|---|
| Recurring machinery repairs capitalised as CAPEX | −€180,000 |
| Owner-manager salary below market | −€70,000 |
| Rent on family-owned warehouse below market | −€50,000 |
| Adjusted EBITDA | €1,700,000 |
At a 6x multiple, the valuation moves from €12M to €10.2M: €1.8M of difference explained entirely by the OPEX/CAPEX boundary and under-provisioned operating costs.
OPEX covers recurring operating costs consumed within the year, flowing directly to the P&L. CAPEX is investment in long-lived assets, capitalised and expensed gradually via depreciation. The boundary between them changes EBITDA, which is why it is a focus of any due diligence.
Yes, directly: EBITDA equals revenue minus OPEX, before depreciation, interest and taxes. Every euro less of operating expense is one more euro of EBITDA — multiplied by the valuation multiple in the final price.
Because EBITDA sustainability depends on operating costs being complete and at market prices. Under-provisioned salaries, below-market related-party rents or improperly capitalised maintenance produce an EBITDA that cannot be replicated after the acquisition.
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