Quality of Earnings Analysis: What You Need to Know Before Buying a Business

My guest today is Chris Hutchinson, a Partner in Ernst & Young's Transaction Advisory Services Group. Chris has over 15 years of experience advising clients on M&A, financings, valuation projects, and due diligence mandates, with a specific focus on private lower-middle-market businesses. Chris and his team have completed an untold number of Quality of Earnings ("QofE") mandates spanning countless industries, including software, technology, business services, distribution, and retail, among others. Chris and I discuss what a QofE is, why it's necessary, and common trends and themes that buyers should look out for. We also discuss the working capital adjustment: What it is, why it's necessary, and common pitfalls for both buyers and sellers to avoid. Please enjoy!