By Tom Schramski, PhD, CM&AA
Volume 2 Issue 15, July 21, 2015
As Chris Blees of BiggsKofford and Graeme Frazier of GF Data noted at the recent Alliance of Merger and Acquisition Advisors (AM&AA) conference in Chicago, the quality of financial reports is a key to obtaining premium multiples of EBITDA in most transactions. This conclusion is based on considerable research, as well as common sense.
Importantly, “quality” is not simply based on good, or even great financial results. It also refers to the clarity of presentation and, as Berman, Knight, and Case write in Financial Intelligence, “the art of using limited data to come as close as possible to an accurate description of how well a company is performing.” When “accurate” becomes “cloudy,” it usually translates into buyer questions and doubt.
Here are some reasons why the quality of your financials is so important:
Buyers don’t expect perfection. If they are successful, they understand adversity and the challenges that impact every healthcare business. What they do expect is to understand the operational truths of your company. High quality financials are an essential linchpin for success.
Tom was the Founder and Managing Partner of VERTESS. He was a Certified Merger & Acquisition Advisor (CM&AA), consultant, and Licensed Psychologist with over 35 years of very successful national experience in the healthcare marketplace, including co-founding and building a $25 million behavioral health/disabilities services company. Tom represented sellers and investors across the healthcare spectrum and was recognized for his executive leadership in the 2005 Entrepreneur of the Year issue of Inc. Tom passed away in December 2018.