How to Build Superior Financial Models for M&A With Patrick McMillan

Financial Modeler's Corner

In this episode of Financial Modelers Corner, host Paul Barnhurst dives deep into the world of Quality of Earnings (QofE) with expert guest Patrick McMillan, a seasoned CFO and transaction advisor. The conversation explores the intricacies of QofE, its importance in financial transactions, and the role it plays in assessing a company's financial health during mergers and acquisitions. Patrick shares real-world examples and insights into how financial professionals can use QofE to make informed decisions.

Patrick McMillan is a fractional CFO and transaction advisor at Amplēo, a Utah-based firm specializing in providing executive support to growing companies. With over two decades of experience in guiding businesses through periods of growth and M&A transactions, Patrick is known for his expertise in Quality of Earnings analysis. He brings a dynamic and passionate approach to finance, blending technical skill with strong storytelling abilities to help businesses navigate complex financial landscapes.

Key takeaways from this week's episode include:

• The role of Quality of Earnings (QofE) in mergers and acquisitions, and how it differs from an audit.
• How to differentiate between non-recurring and operating items when analyzing financial statements.
• The importance of normalizing earnings for better understanding of a company’s performance.
• Why soft skills like communication and storytelling are crucial in financial analysis.
• Insights into how personal finance modeling can improve your financial modeling skills.

Here are a few quotes from Patrick McMillan:

• "Quality of earnings isn't just an audit; it shows you how and why a company is performing in a certain way." - Patrick McMillan
• "Understanding non-operating and non-recurring items is crucial to a quality of earnings report." - Patrick McMillan
• "Patience is the most important lesson I’ve learned in my career, especially in communication." - Patrick McMillan
• "Modeling your own personal finances is a great way to practice financial modeling skills." - Patrick McMillan

With actionable advice on financial modeling, transaction strategies, and lessons learned from his personal experiences, Patrick’s insights will resonate with professionals looking to sharpen their financial skills and improve decision-making in dynamic business environments.

Follow Patrick:

• Website - https://ampleo.com/contact/
• LinkedIn - https://www.linkedin.com/in/patrickmcmillan/

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• Website - https://www.thefpandaguy.com  
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• YouTube - https://www.youtube.com/@thefpaguy8376 

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In today’s episode:

[01:10] - Introduction to Patrick McMillan

[04:25] - Worst Financial Model Story

[07:30] - Quality of Earnings vs. Audits

[09:30] - Identifying Non-Recurring vs. Operating Items

[13:31] - Patrick’s Journey to Becoming the "QofE Guy"

[17:57] - The technical understanding of QofE

[24:51] - Patrick’s decision for MBA

[29:56] - Importance of soft skills in QofE

[35:20] - Rapid-Fire Financial Modeling Tips

[38:44] - Personal Insights: Mountain Biking and Life Lessons