When buying a business, be wary of adjusted financials that add back discretionary bonuses. Do employees really receive a “discretionary” bonus? If employees have been given bonuses the last three years running, they may be technically discretionary, but I sure wouldn’t want to be the new owner who didn’t pay out in year four.
Make sure the seller gives you detailed explanations in writing for all adjustments so you and your deal team can confirm which adjustments are “real” and you will accept.
