Understanding Add-Backs When Buying a Business

In the world of mergers and acquisitions (M&A), add-backs are a crucial factor in determining the true financial state of a target company. These adjustments to a company's financial statements allow buyers to evaluate the real earnings or cash flow potential of the business they're looking to acquire. However, the distinction between acceptable and unacceptable add-backs can be a contentious issue during negotiations. It's important to understand the difference to ensure a fair and transparent transaction.