Ep. 115 — Ryan Turbes: The Gap Between Your LOI and Your Bank Account

4 min read

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Episode Summary

You get the LOI. $20M. You start doing the math on the life that number buys. Nobody at the table has told you what the IRS is taking, how the deal gets structured, or what your working capital peg is going to do to the wire transfer. The headline price isn’t what you walk away with. Milestone 6 — Transaction Value is. I brought on Ryan Turbes, a transaction CPA at Boulay, to walk through the gap between the two. We got into the difference between a normal CPA and an M&A CPA, how to normalize EBITDA with add-backs the buyer will actually accept, how the working capital peg works (and what a collar does), asset versus stock sale, the Section 338(h)(10) checkbox that can swing seven figures, depreciation recapture, the waterfall from headline price down to cash in your account, and how 1031s and the building fit when you back everything into what you actually need to retire. Ryan and I went to college together. The fact that we both ended up in spreadsheets is a story for another day.

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## Top 10 Takeaways
  1. Enterprise Value is the headline. Net proceeds is the number that buys your next life. Don’t confuse them.
  2. Your normal CPA does taxes on what already happened. An M&A CPA structures what’s about to happen. Different sport.
  3. Add-backs only work if you can defend them. Identify them before you go to market, not at the altar.
  4. The working capital peg is a separate calculation from purchase price. A $200K swing is a real wire at close.
  5. Buyers want asset sales for the step-up. Sellers want stock sales for capital gains. You’re starting at a disadvantage.
  6. The Section 338(h)(10) election is a checkbox that can swing seven figures. Your tax preparer may not know it exists.
  7. Depreciation recapture is ordinary income, not capital gains. Heavy Section 179 today means a bigger tax bill at close.
  8. Installment notes, earnouts, and employment agreements are buckets, each taxed differently. Knowing the buckets gives you options.
  9. Back into the number first. What income do you need for life? Work the deal structure backward from that.
  10. You can’t start planning your exit too early. Marketability isn’t a switch you flip the year you want out.

Sound Bites

“Most sellers want a stock deal. Most buyers want an asset deal.” (@00:27:03) — Ryan Turbes

“Everybody loves to pay taxes. Taxes is a good thing. It’s better than losing money.” (@00:24:14) — Ryan Turbes

“Does your normal CPA who’s doing your tax returns know that? That check box could save you millions.” (@00:34:03) — Ryan Tansom

“You can never start planning for a succession plan soon enough.” (@00:54:51) — Ryan Turbes

“Being the numbers guy I can tell you if it makes sense or not from a deal perspective. But getting the seller to overcome the emotional attachment to their business is probably the most difficult part.” (@00:56:24) — Ryan Turbes

About This Episode

Ryan Turbes is a transaction CPA at Boulay, a public accounting firm with offices in Eden Prairie, Minneapolis, and Naples. He spends his time on the buy and sell side of M&A transactions, working with private equity groups, family investment offices, search funds, and owners preparing to sell. He and Ryan Tansom go back to college. This is an early episode in the iBD canon (2019) and a foundational reference for the gap between Enterprise Value and net proceeds. That’s the conversation most owners don’t have until it’s already too late to do anything about it.

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