The Importance of a Quality of Earnings Report During Due Diligence

Entering into a business transaction requires full disclosure, and a Quality of Earnings Report provides the perfect opportunity to bring everything to light. Matthew Allison is a Partner at Citrin Cooperman's Tax Practice, and he joins us to talk about the importance of a Quality of Earnings Report in due diligence during a business sale transaction. We kick off our conversation by defining what a Quality of Earnings Report is and how its directive differs on the buy- and sell-side. Diving into the details, we consider how a thorough consideration of information improves relationships and how sellers can embrace a realistic mindset during the research period. Next, we discuss the impact of Quality of Earnings on sales price and how pre-exposure can increase buyer comfort level when entering into a transaction. Lastly, we get into the importance of bringing everything to light during the reporting period and presenting it with transparency. Thanks for tuning in.

Key Points From This Episode:

• Matt Allison's broad experience in business growth, transition planning, operational finance, and more.
• What a Quality of Earnings Report is.
• The two very different directives of a Quality of Earnings Report for buyers and sellers.
• Information sellers should ask their CPAs or Brokers to prioritize.
• Having a realistic mindset leading up to a sale.
• Embracing the opportunity to examine everything during the research period.
• Examples of how Quality of Earnings can impact the sales price.
• Taking advantage of the opportunity to expose everything on the sales side.

Tip of the Day: Bad news doesn't get better with age. There is no sense in trying to hold anything back when there is going to be significant scrutiny on everything. Hand over everything — there's no reason to keep anything hidden.

Links Mentioned in Today's Episode:

Matt Allison on LinkedIn

Matt Allison Email

Citrin Cooperman

Transaction Talk

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