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The M&A Source Podcast

The M&A Source Podcast

Written by: M&A Source
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 If you work in the business of buying, growing, or selling businesses, this is the podcast for you! Welcome to the M&A Source Podcast, a podcast brought to you by M&A Source, a non-profit professional organization that provides training and education for small to mid-size business mergers and acquisitions intermediaries. In each episode of the podcast, we will interview leaders in the M&A world to discuss education opportunities provided by M&A Source, trends in M&A Markets, and useful insights provided by the experts that use them. Learn more about the podcast and the organization at M&A Source's website: www.masource.org. LEGAL DISCLAIMER: This resource is intended for educational purposes only and does not constitute legal, financial, or tax advice. The information provided herein should not be relied upon for any specific business or financial decision without first consulting appropriate professional counsel. Readers are encouraged to seek advice from qualified attorneys, accountants, or other professionals to address their unique circumstances. Neither the authors nor the publisher assumes any responsibility for actions taken based on the information provided in this resource.Copyright 2024 MASource Podcast Economics Leadership Management & Leadership
Episodes
  • ONWC Chain From Asset Dispositions to True Up

    ONWC Chain From Asset Dispositions to True Up
    Dec 19 2025
    Connect with Us and Access Show Resources: https://snip.ly/mas_interact29In this episode, we connect asset dispositions (Form 4797), depreciation timing and Section 179 (Publication 946 / Form 4562 support), operating net working capital (process-first peg method + dollar-for-dollar true-up), and asset allocation reporting (Form 8594 residual method). We focus on building a defensible, repeatable approach that holds up in buyer diligence and reduces friction in LOI and purchase agreement drafting.Topics DiscussedIntroduction and Problem StatementThe episode opens by identifying a common pattern in M&A deals: parties argue about working capital adjustments and purchase price before agreeing on what the numbers actually mean. Simultaneously, seller earnings appear distorted due to equipment sales, asset write-offs, or Section 179 depreciation elections. This creates confusion among buyers, sellers, attorneys, CPAs, and brokers who talk past one another. The host promises a process-first methodology connecting four critical elements: IRS Form 4797 asset dispositions, depreciation choices like Section 179, operating working capital, and asset allocation reporting.Asset Dispositions and Form 4797When businesses sell or dispose of property, tax reporting flows through IRS Form 4797. The key concept is "recapture," where some or all disposition gains are treated as ordinary income depending on the asset type, depreciation method, and sale price. Part 3 of Form 4797 computes ordinary income recapture based on the difference between depreciated value and disposition value. The critical valuation takeaway: disposition gains and losses distort operating earnings. A one-time equipment sale may boost income in a non-repeatable way, while disposal losses can depress earnings despite healthy operations. Applying multiples to this "noise" leads to business mispricing.Classification Framework for DispositionsThe proper approach involves classification rather than panic. The key question: Is the business selling assets as a one-time event, or is it part of the operating model structure? Fleet-driven businesses (car rentals, delivery fleets) have planned asset turnover baked into their model—vehicles run for two years then sell on schedule. These dispositions aren't random income events but part of the business engine that will continue with the next buyer. For such cases, create a "steady state view" using averages: replacement cadence, typical proceeds, replacement capex, and recurring earnings impact. Use trailing twelve-month or seasonally adjusted numbers to model the asset cycle as normal operating pattern, normalizing to what buyers should expect going forward. This eliminates buyer skepticism by modeling rather than hand-waving.Section 179 and Depreciation ChoicesIRS Publication 946 outlines depreciation frameworks, including Section 179 elections allowing taxpayers to expense qualifying property immediately rather than depreciating over time—"rapid depreciation" with obvious tax advantages. For deal advisors, Section 179 changes timing: it can make P&L look worse when the business is healthy and investing, or make future years look artificially better because deductions were pulled forward. The solution: normalize with steady state thinking by smoothing out fluctuations to find what's normal. Ask: What level of capex and depreciation is required to keep this business operating as is? Separately address cash reality of replacements versus tax timing of deductions. When buyers claim earnings are low due to high depreciation, normalize to maintenance capex levels and steady state depreciation, applying multiples to maintainable performance, not tax timing.Operating Net Working Capital FoundationIn accounting, "current" means expected to be realized in cash, sold, consumed, or settled within a normal operating cycle (typically 12 months)—the backbone of current assets and current liabilities. The GAAP definition of working capital is current assets minus current liabilities, which is correct but insufficient for sales processes. The deal context requires identifying what's operating versus non-operating—what contributes to business performance in the current period versus what doesn't. The core formula: Operating Net Working Capital = Operating Current Assets - Operating Current Liabilities. The word "operating" is the critical addition.Process-First Method for Working CapitalThe most important move: before discussing numbers, change the conversation early and guide everyone to agree on definitions—specifically what's included and excluded. In Main Street and lower middle market deals, operating net working capital typically excludes cash, interest-bearing debt, owner and related party items, and non-operating one-time balances unless the deal specifies otherwise. The first win is definitional clarity—you cannot have a target peg without good definitions. The process-first method: tell parties you're not...
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    21 mins
  • Inside the Spring 2025 M&A Source Conference: A Conversation with Jaclyn Ring

    Inside the Spring 2025 M&A Source Conference: A Conversation with Jaclyn Ring
    May 12 2025
    Whether you’re a seasoned advisor or just making the leap from main street to the lower middle market, this episode highlights why M&A Source is the room to be in—and how you can make the most of every minute there.
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    27 mins
  • Stock Certificates and Ledgers: Reconstructing Ownership

    Stock Certificates and Ledgers: Reconstructing Ownership
    Mar 22 2025
    In this episode, we talk about stock certificates, what they are, how they work, and how to reconstruct equity ownership history when a ledger doesn’t exist.
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    29 mins
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