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.
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