If we think about an EV over EBIT multiple, that EV is from a point in time (often the end of the year) If we made a purchase of a company during the year, well all of its assets and all of its liabilities would be in that EV because its all in the balance sheet at the one point in time But then again if we look at the EBIT on the bottom half of the multiple Well that will include the months of EBIT that we actually owned that company So if we only owned if for month of the year We'll only have 1/12th of its EBIT. If we owned it for six months of the year, we'll only have six months of its EBIT An EV over EBIT multiple should be forward looking and we want to include all 12 months, so here we have an example We've got an acquisition closes on the 30th of September and the acquirer has a 31st of December year end So the acquisition was only owned for October, November and December for 3/12th of the year So we've got a consolidated column here, if we look at EBIT, it says it's 100 (that includes 3/12th of the targets EBIT) In the second column you can see, target had an EBIT of 50 So 3/12th of that is included in the consolidated column. So consolidated earnings already include 25% of the targets number So if 12.5 of that target's EBIT of 50 has been included, what about the other 37.5? That's what the proforma does, the proforma column says let's put another 75% of the target's numbers onto our company So proforma now says, what if we owned the company for the entire of the year? What would our numbers have been? And we can now look forward and come up with a forward looking multiple