Mergers & Acquisitions

M&A Talk Podcast

M&A Talk is the #1 podcast on mergers & acquisitions. At M&A Talk we bring you exclusive interviews with experts in business sales, valuations, mergers and acquisitions, and more. We talk to the most experienced professionals in the industry to uncover their secrets.

Quality of Earnings in M&A Explained in 30 Minutes

Quality of Earnings in M&A Explained in 30 Minutes

Nicholas Spezio

Quality of Earnings Report | Financial Due Diligence

What is a quality of earnings (Q of E) report? How can it help sellers and buyers in M&A transactions? Nicholas Spezio returns to M&A Talk to discuss the importance of the Q of E report. From an overview of the process to the difference between an audit and a Q of E, Nicholas covers how a Q of E can ensure that both parties are prepared for the diligence process by flushing out potential issues early enough in the transaction to be able to deal with the issues rather than losing the deal.

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Guest Profile

Nicholas Spezio is the Director of Transaction Services at Exbo Group. He has experience in M&A as both a buy-side and sell-side advisor, helping investors buy more than 40 businesses in the last two years and helping sellers exit or raise capital by performing financial due diligence at the transaction level. Nicholas spent seven years at PwC in their Asset & Wealth Management practice, auditing some of the world’s largest hedge funds and investment management companies, including Tiger Global, BlueMountain Capital Management, and Vanguard. He also traveled the world to help train colleagues on digital transformation software, such as Alteryx and UiPath, in the new age of leveraging technology to facilitate audits and accounting. Nicholas and his group provide full lifecycle financial due diligence and integration support to some of the most active buyers in the lower middle market.

Topics Covered

  • What is a quality of earnings (Q of E) report? [1:50]
  • Why is it necessary to hire a firm to do a Q of E? [2:17]
  • What’s the difference between a sell-side vs. a buy-side Q of E report? [3:06]
  • What is accounting remediation? [3:49]
  • What percentage of buyers do a Q of E on a company before they close? [6:44]
  • Is it important for sellers to do their own Q of E? [7:25]
  • What are the potential ramifications of not doing a Q of E? [10:23]
  • How much of the Q of E is aimed at the adjustments and recasting or normalizing the financial statements? [13:40]
  • Why is it important that businesses have financials that are compliant with GAAP? [15:00]
  • If a business owner has just had an audit, do they still need a Q of E? [17:41]
  • What’s the difference between an audit and a Q of E? [18:53]
  • Who does the Q of E report? [20:21]
  • How far in advance of the sale should a Q of E be done on both the buy-side and the sell side? [23:08]
  • Advice to entrepreneurs who are in the process of selling their company. [24:51]

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Resources Mentioned

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Acronyms or Terms Used in This Episode

  • GAAP: generally accepted accounting principles
  • PwC: PricewaterhouseCoopers is the second-largest professional services network in the world and is considered one of the Big Four accounting firms.

To suggest guests, topics, or questions for future podcast episodes, contact Morgan & Westfield.



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