Mergers & Acquisitions For Dummies
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Numbers don’t necessarily speak for themselves, and M&A Buyers don’t want to have to translate them, so you as Seller should take care to present your financials in the offering document in the best light possible.

You can’t get around dealing with accounting and financials in the offering document, so make sure whoever is compiling this part of the offering document has strong accounting skills.

An offering document should have at least three years of historical financial results; five years is much better.

An offering document with three to five years of financial results helps Buyer better understand the recent trends of the business. Some of the key historical financial aspects include

  • Are sales increasing or decreasing? What about profits?

  • Is the company maintaining its gross margin?

  • Are any operating expenses getting out of control?

  • How much working capital does the company have?

  • Does the company collect accounts receivable in a timely fashion and pay its bills on time?

  • Does the company have long-term debt, and will that debt get in the way of doing a deal?

Make sure you include a full set of financials: income statement, balance sheet, and cash flow statement.

When presenting financials, present the numbers down to an earnings before interest, taxes, depreciation, and amortization (EBITDA) calculation. If the company has substantial add backs (nonrecurring, one-time only, or owner-related expenses), include those add backs in the historical and current financials. Make sure you provide details of what exactly those add backs comprise.

About This Article

This article is from the book:

About the book author:

Bill Snow is an authority on mergers and acquisitions. He has held leadership roles in public companies, venture-backed dotcoms, and angel funded start-ups. His perspective on corporate development gives him insight into the needs of business owners aiming to create value by selling or acquiring companies.

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