Introduction: Words Matter in M&A
In founder conversations the words “recurring” and “reoccurring” are usually treated as synonyms. In an M&A process, however, buyers draw a bright line between the two because that line shapes how they model cash flows, risk, and ultimately price. When you position your revenue profile, especially with financial sponsors who begin every discussion with EBITDA multiples, precision is essential.
Definitions: Recurring vs. Reoccurring
Recurring Revenue
- Predictable and contractually committed
- Examples include subscriptions, annual licenses, multi-year service retainers
- Commonly tracked as Monthly Recurring Revenue or Annual Recurring Revenue
Reoccurring Revenue
- Revenue that repeats regularly but without a binding contract
- Examples include take rates, usage-based fees, or repeat purchases that rely on customer behavior rather than obligation
- Frequent but not guaranteed
Real-World Examples
| Business Type | Revenue Description | Classification |
|---|---|---|
| SaaS platform | Auto-renewing monthly subscriptions | Recurring |
| Fintech processor | Two percent fee on each transaction | Reoccurring |
| Digital agency | Annual client retainers under contract | Recurring |
| Marketplace | Returning buyers with no obligation to repurchase | Reoccurring |
How Buyers Evaluate Each Revenue Type
Why buyers value recurring revenue
- High visibility supports leverage models based on forward EBITDA
- Customer stickiness reduces churn risk
- Contractual nature limits revenue volatility after closing
What buyers scrutinise in reoccurring revenue
- Frequency and consistency of customer behaviour
- Cohort stability and repeat rate over time
- Margin profile relative to fixed costs
- Plausible roadmap to convert repeat behaviour into contractual commitments
If most of your top line is reoccurring, expect deeper diligence and a heavier discount rate unless you can prove defensibility.
Valuation Impacts
- EBITDA multiples are the primary yardstick in middle-market transactions because they reflect cash available to service debt
- Recurring revenue lifts EBITDA quality, justifying higher multiples
- Reoccurring revenue can still trade well, but buyers often apply a discount or build earn-outs to offset forecast risk
- Revenue multiples are used as a fallback only when high growth and low or negative profitability make EBITDA less meaningful
Sellers sometimes discover in diligence that buyers have reclassified portions of their top line from recurring to reoccurring or even non-recurring. This reclassification lowers the effective EBITDA multiple unless you address it early with clear definitions and data.
How to Present Your Revenue Profile
- Label revenue streams explicitly as recurring or reoccurring in your financial model
- Segment KPIs such as churn, gross margin, and customer lifetime value for each stream
- Provide cohort analyses to prove repeat behaviour for reoccurring revenue
- If you have a plan to convert reoccurring to recurring, outline the timeline, required investment, and expected uplift
Converting Reoccurring into Recurring
Buyers pay more for predictability. Practical tactics include:
- Introducing tiered subscriptions for high-frequency customers
- Offering incentives for multi-month or annual commitments
- Automating usage thresholds that trigger upgrades to contracted plans
Even partial progress can reduce buyer discounting and anchor valuation discussions on EBITDA quality rather than uncertainty.
Conclusion
Recurring revenue is contractual and forecastable. Reoccurring revenue is repeatable but dependent on customer choice. Both have value, yet buyers do not treat them the same. In an M&A process led by EBITDA multiples, recurring revenue enhances multiple quality while reoccurring revenue demands proof of stability. If your growth story leans on reoccurring streams, fortify your narrative with data, show a path to contractual adoption, and be ready to pivot to revenue multiples only if high growth outpaces current profitability. Precision today will protect pricing power when you reach the negotiating table.