We normalize EBITDA (earnings before interest, taxes, depreciation and amortization) by identifying items that may affect the valuation, helping clients to understand earnings quality and gain a clear picture of a company’s true state of financial health. Items may include noncash or nonrecurring transactions, timing errors, pro forma adjustments and normalization adjustments.

We focus on the most relevant business and industry-specific key performance indicators to aid in the evaluation of a company. This may include:

• Requesting facility tours and information about the target company’s history and operations
• Gaining an understanding of accounting policies and procedures
• Inquiring about related parties, intercompany transactions, foreign currencies, etc.
• Analyzing head count by department, function, location, etc.
• Conducting a revenue and expense trending analysis
• Analyzing revenue and profitability by customer, location and product
• Conducting a cash flow analysis

RSM’s analysis includes:

• Revenue by customer, product and geography
• Revenue recognition
• Gross-to-net sales deductions
• The components and trending cost of sales
• The components and trending of operating expenses

RSM’s analysis includes the following key elements:

• Analyzing cash accounts and comparing cash collections to revenue and cash disbursements to expense
• Analyzing accounting for and trending of accounts receivable, inventory, other assets, accounts payable, accrued expenses
• Performing equity roll-forward

In an effort to minimize risk while capturing additional deal value throughout the deal continuum, we review specific deal-related financial or contractual issues to prepare for potential negotiation points to keep the deal moving forward and toward a result that works for the respective parties.

• Net working capital analysis
• Seasonality analysis
• Purchase agreement reviews
• Earnout calculations
• Cash reconciliations to revenue and expenses
• Indebtedness analysis