Money Talk: Company Value Hinges on Quality of Earnings

9) Union vs. Non-union. With the stock market downturn, the impact of unions—and multi-employer defined benefit plans, in particular—must be considered in any sale transaction. Companies remaining in a multi-employer union plan have to cover the losses of companies that go bankrupt or make bad investment decisions. For buyers who plan to close a seller’s union facility post-sale, the payment that has to be made to the pension plan by the people closing the plant is often greater than the value of the company—in many cases, millions of dollars. Buyers considering a target company that is in a multi-union employer benefit plan, therefore, need to carefully do their homework before proceeding.

Quality of earnings is impacted by multiple factors—factors that must be considered in assessing a company’s value. It’s not the amount, but the true quality of earnings, that counts.

Stuart Margolis, CPA and partner at MargolisBecker LLC, provides information that helps firms operate profitably. The company compiles the annual Printing Industries of America Ratios.

Paul Reilly is with New Direction Partners LLC, which has guided more than 200 printing company owners through the sales and merger process. Find more information at www.MyPRINTResource.com/10164246.