QUALITY EARNINGS AND THE EXIT PLANNING PROCESS

The purpose of this session is an introduction to the Quality of Earnings (“QofE”) process and how it fits into exit planning. A QofE report is typically performed during the due diligence process of either acquiring a Company or selling a Company in order to analyze historic earnings and arrive at an Adjusted EBITDA typically used for deal valuation. When acquiring a Company (buy-side), a QofE report is typically required by a lender providing financing. When selling a Company (sell-side) the investment banker will typically suggest its client gets a QofE performed prior to going to market in order to present Adjusted EBITDA in its marketing materials that has already been vetted by a third-party accountant or consultant.

A QofE is different than an audit and both have completely different purposes. The purpose of an audit is to provide reasonable assurance that a company’s financial statements are free from material misstatement in accordance with US GAAP standards. Audits have materiality thresholds while QofE does not. Adjustments to financial statements that could be considered to be immaterial with an audit could be very significant with a QofE as valuation is based on a multiple of EBITDA. A QofE report is tailored to the needs of the requestors need (i.e., bank, private equity group, investment banks). From a high-level a QofE purposes includes (i) are the numbers reported by the Company accurate and complete, (ii) are adjustments to EBITDA valid with proof, and (iii) an analysis of working capital and operations.

This session will also stress the importance on performing a detailed QofE project early in the exit planning stage in order to know historical and current adjusted EBITDA levels.

Learning Objectives:

  • Understanding the purpose of a Quality of Earnings report and types of users.
  • Understand typical bottlenecks and issues identified in the QofE process.
  • Discuss the importance of the Quality of Earnings process in Exit Planning.

Event Description

Join Ryan McCaslin, Transaction Advisory Services Partner of EHTC, as we discuss is an introduction to the Quality of Earnings (“QofE”) process and how it fits into exit planning. A QofE report is performed during the due diligence process of either acquiring a Company or selling a Company in order to analyze historic earnings and arrive at an Adjusted EBITDA typically used for deal valuation.

Event Details

Date: Tuesday, July 02, 2024
Time: 1:00 pm - 2:00 pm Eastern Time
Where: Zoom
Cost: Free
EPI Hours: 1
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Who Should Attend?

  • Attorneys

    You have close relationships with clients, and can benefit from being the first advisor to introduce the idea of exit planning.

  • Wealth Managers

    You’re a skilled relationship person. Being entangled into your clients’ professional lives matters as you build a strategy to manage their wealth upon them harvesting it from their business. Exit planning allows you to build a deeper relationship with your client, expands your COI network, while giving you an early seat at table well before the liquidity event.

  • Business Owners

  • CPAs/Accountants

    Owners participating in the State of Owner Readiness research continue to indicate that you are the No. 1 "Most Trusted Advisor." You are a natural fit to lead the exit planning team and deepen your relationship (and retention) of next generation owners.

  • Financial Advisors

    One of the critical ‘legs of the stool’ is personal financing planning. An owner must have a strong financial plan & contingency plan post-transition to enable them to thrive in the next act of the lives personally and financially. Exit planning brings this future mindset into the present. Exit is now.

  • Private Business Owners

EXIT PLANNING IS GOOD BUSINESS STRATEGY

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