M&A Talk: #1 Podcast on Selling a Business 7 Critical Issues Related to Quality of Earnings
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Jan 3, 2023 In this insightful discussion, Bill Wiersema from Miller Cooper and Company, a seasoned expert in financial due diligence, unpacks seven critical issues surrounding Quality of Earnings. He highlights the pandemic's lasting impact on earnings assessments and the recent GAAP rule changes. Wiersema emphasizes the value of a QoE report for both buyers and sellers, addresses challenges with revenue recognition, and shares real-life examples of financial misrepresentation. Dive into the complexities of accounting adjustments and the importance of thorough due diligence in today's evolving market.
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Remote Diligence Is Now The Norm
- Remote diligence has become standard and removes geographic limits for QoE providers.
- Bill Wiersema says remote data rooms and virtual plant tours make national engagements routine.
Handle PPP Loan Forgiveness Conservatively
- Do treat PPP loan forgiveness as a non‑operating gain unless you can specifically document COVID damage tied to the proceeds.
- Bill Wiersema advises presenting PPP as a gain on debt extinguishment under GAAP, not as an EBITDA add‑back.
Adjust Owner Pay For QBI Tax Effects
- Do not rely on owner pay as reported when valuing owner‑managed pass‑throughs because QBI changed incentives.
- Bill Wiersema warns buyers to adjust owner compensation to market rates despite the 20% qualified business income deduction.
