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Don’t Miss This: Insights That Could Save Your Next Deal

Author

David Burns
December 26, 2024

In partnership with

Hey, it’s David.

Before we close out the year, I want to share one last resource that could significantly impact your M&A journey in 2025.

Chris Muccio and I recently sat down with Elliott Holland, CEO of Guardian Due Diligence, to dive into one of the most critical (and often misunderstood) aspects of dealmaking: Quality of Earnings (QoE). 

Whether you’re buying, selling, or investing, this conversation will help you see the financials of a business through a sharper lens, empowering you to make smarter, more informed decisions.

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Here’s what we cover in this insightful discussion:

  1. What QoE Is and Why It’s Essential: Elliott explains how QoE provides clarity on cash flow, helping buyers avoid deals that look good on paper but fall short in reality.

  2. Timing is Everything: Learn why starting the QoE process immediately after signing a Letter of Intent (LOI) is critical for staying on track and avoiding costly delays.

  3. Overlooked Red Flags: We discuss understated expenses, egregious EBITDA add-backs, and why you should focus on real operational profitability, not just reported earnings.

  4. Challenges with Small Business Financials: Elliott shares how messy accounting practices, tax-only CPA relationships, and unsophisticated records can create traps for the unprepared.

  5. Seller-Side QoE Benefits: Discover how sellers can use QoE to increase buyer confidence, secure higher bids, and smooth the due diligence process.

But that’s just scratching the surface. Here are a few standout lessons you’ll take away:

  • Keep Emotions in Check: First-time buyers often get too attached to a deal after signing the LOI. Elliott offers tips on staying grounded and focused on facts rather than emotions.

  • QoE vs. Audits: Understand how QoE is tailored for deal-specific needs, providing actionable insights faster than a traditional audit.

  • Avoiding Bad Deals: Sometimes walking away is the best decision. Elliott explains why a QoE can save you from costly mistakes, even if the deal falls through.

  • True Cash Flow Matters: Elliott describes EBITDA as a "lazy man’s cashflow," highlighting the importance of digging deeper to understand actual free cash flow.

  • Practical QoE Applications: Learn how to leverage QoE to build credibility with financial institutions, identify working capital needs, and set realistic profitability expectations.

This conversation is packed with insights you can apply right away, whether you’re assessing your next acquisition, preparing to sell, or simply looking to sharpen your due diligence skills.

Let’s make 2025 the year of smarter decisions, stronger deals, and fewer headaches.

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Cheers,
David