Hi all,
This is going to come off as a pretty basic question, but I would love some help understanding a QoE, in particular the add backs/pro forma adjustments that are made. More so from a conceptual standpoint, but also how the seller is thinking about this (e.g. add back previous transaction fees), and then how the buyer is thinking about this (e.g. wants to remove revenue from the historical period for a discontinued operation)
Ultimately, you want to show strong historical and LTM performance of the company so the seller wants to add back certain items, but obviously the buyer takes this into account when bidding so they heavily scrutinize. I think I understand it, but this is a pretty critical part of every process so it would be great to hear how people think about this workstream from both a buyer and seller's perspective.
Summarizing, everyone wants to figure out the true earnings of the business. If more efficient, feel free to pass along any reference materials that you have found helpful. Thanks so much!
Hey DiamondsDancing, I'm here to break the silence...any of these links help you?:
You're welcome.
Surprised this exciting topic didn't blow up
I think you are overthinking it. There are nuances with each QoE, but the high-level goals never change.
Both parties are trying to get to the ordinary, operating cash flow of the business. The seller wants to add back everything that is extraordinary, non-recurring or non-business. The buyer wants to include everything that is business-related or could reoccur.
Often, disagreements come down to what is or isn't expected to continue (revenue or cost) and what is or isn't a "cost of doing business".
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