A buyer can agree on a valuation multiple and still misunderstand the earnings to which it is applied. Rajeev Khandelwal’s documented M&A financing experience makes the quality of those earnings a relevant part of his professional landscape. The transaction depends on understanding what the business can sustain. Reported profit needs to be connected with customers, costs and cash rather than accepted as one undifferentiated number.
Separate recurring activity
Asset disposals, exceptional income and unusual expenses can affect a reporting period without describing normal operations. The buyer should identify those items and understand why they occurred. Adjustments need evidence, not simply the seller’s preferred presentation. A cost described as one-off may recur regularly under different names, while a temporary expense can genuinely disappear after a specific operational change has been completed and demonstrated.
Examine revenue recognition
Sales recorded near a period end deserve attention to delivery, acceptance and collection. The commercial question is whether the transaction reflects a completed obligation and a realistic amount receivable. A rising revenue line can conceal extended credit or disputed deliveries. Following selected transactions through supporting records helps the buyer assess the connection between reported growth and the cash the acquired business is likely to generate after ownership changes.
Include the cost of replacement
Owner-managed companies may rely on services priced below a sustainable market level. The founder may perform several roles or provide premises on favourable terms. A buyer needs to understand the cost of replacing that support. Conversely, some expenses may genuinely fall away after integration. The analysis should distinguish those cases carefully so that the acquisition model reflects a business that can operate under its new ownership structure.
Value the repeatable business
Credit Connect’s M&A and equity advisory offerings connect this issue with Rajeev’s transaction context. Quality-of-earnings work does not aim to produce the most attractive adjusted figure. It aims to establish a credible base for valuation and financing. A buyer is better placed to negotiate when it can explain which earnings are repeatable, which depend on specific conditions and how those conclusions affect the capital committed to the acquisition.
