Horizons Fall/Winter 2020

∙ Reduced meals & entertainment expenses

Similarly, many businesses carried different inventory levels than historical periods, some higher due to declines in sales, some lower due to supply chain issues. Utilizing a twelve- month average working capital peg is likely not the most accurate figure. Alternative methods for establishing the peg should be considered to reflect the new reality for the company. In Summary While the news for mergers and acquisitions may seem negative in the current environment, we believe a rebound is just around the corner. Private equity funds still have a record amount of funds to invest. Baby boomer business owners still would like to transition into retirement. We expect the end of the pandemic to start the next cycle of deal activity. Our dedicated transaction services team at RubinBrown would welcome the opportunity to discuss your acquisition or sale plans. Please do not hesitate to call one of our trusted professionals.

∙ Deferred/reduced R&D spending

∙ Reduced marketing and advertising

∙ Deferred capital expenditures

∙ Deferred tax payments

∙ Lower utility expenses

On the other hand, there are one-time expenses that have increased as a result of the pandemic. Below are just a few examples:

∙ Bad debts

∙ Employee severance costs

∙ Incremental legal expenses

∙ Increased IT costs

∙ Increased janitorial/sanitation expense

∙ One-time expenses to set up/promote remote work environment

∙ Inventory write-offs from spoilage or obsolescence

MERGERS & ACQUISITIONS SERVICES RubinBrown can help successfully navigate the transaction process. From initial thought to critical post-closing and integration activities.

As can be seen, 2020 will undoubtedly be a year with a high number of due diligence adjustments to EBITDA for all businesses.

Ben Barnes, CPA, CGMA Partner-In-Charge Mergers & Acquisitions Services 314.678.3531 ben.barnes@rubinbrown.com

Working Capital Considerations Let us also not forget the impact the pandemic has had on the level of working capital in many businesses. In the year following the pandemic, the level of historical working capital will require additional scrutiny. As a first rule of thumb, for any adjustments made to EBITDA, it is important to consider if there is also a corresponding adjustment to net working capital.

Jeff Sackman, CPA, CM&AA, CGMA Partner Mergers & Acquisitions Services 314.290.3406 jeff.sackman@rubinbrown.com

Michael Bean, CPA, CFA Manager Mergers & Acquisitions Services 816.859.7903 michael.bean@rubinbrown.com

The pandemic distorted accounts receivables and payables for many

businesses during portions of 2020, both in total and relative to revenues and expenses.

Fall/Winter 2020

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