Quality of Earnings Built Around Your Deal
From smaller acquisitions to complex, multi-entity transactions, our Quality of Earnings engagements are scoped around the size and complexity of the deal, with fixed fees confirmed before work begins.
Generally suited for a single-entity acquisition with a purchase price of approximately $5 million or less and financial records maintained within a single accounting system.
Scope may include:
- Proof of cash analysis reconciling bank activity to financial statements and available tax records
- Adjusted EBITDA analysis with supporting documentation for identified adjustments
- Review of owner compensation, related-party transactions, and customer concentration
- Normalized earnings analysis to support acquisition and financing considerations
Generally suited for transactions involving one to three entities and purchase prices of approximately $5 million to $10 million, particularly where additional diligence may be required.
Scope may include Standard-level procedures, plus:
- Month-by-month earnings analysis across the periods reviewed
- Working capital trends and debt or debt-like item schedules
- Receivables and payables aging analysis, including DSO and DPO
- Source-linked Excel databook and key findings or red flag summary
Designed for larger or more complex transactions where deal size, entity structure, financial complexity, or requested support requires a more tailored scope of work.
Scope may include Core-level procedures, plus:
- Working capital analysis and net debt bridge considerations
- Review of unrecorded liabilities, contracts, leases, and commitments
- Fixed asset rollforward and sustaining capital expenditure analysis
- Transaction-related financial support and lender coordination, as applicable
Final pricing is based on the size and complexity of the transaction, the quality and availability of the financial records, and the level of diligence and transaction support required.
Scoping Discussion
We discuss the transaction, financing requirements, entity structure, timeline, and expected scope of the QofE engagement.
Provide Financial Information
Our team reviews the available financial records, data room, accounting system access, and other information needed to define the engagement.
Receive Your Proposal
Once the required information is received and reviewed, we provide a defined scope, estimated timeline, deliverables, and engagement fee.
Scope by Engagement
Compare the procedures generally included within each engagement level. Final procedures and deliverables are determined by the transaction, available financial information, and agreed-upon scope.
| Procedure | Standard Starting at $12,500 | Core Starting at $22,500 | Comprehensive Pricing Varies by Scope |
|---|---|---|---|
| Cash and Earnings | |||
| Proof of cash analysis reconciling bank activity to financial statements and available tax records | ● | ● | ● |
| Proof of cash covering trailing twelve months and prior fiscal periods, as applicable | ● | ● | ● |
| Tax transcript and filed-return comparison to available financial records | ● | ● | ● |
| Adjusted EBITDA analysis with supporting documentation for identified adjustments | ● | ● | ● |
| Review of owner compensation and related-party transactions | ● | ● | ● |
| Normalized earnings analysis to support financing and debt-service considerations | ● | ● | ● |
| Revenue and Margin | |||
| Revenue, gross margin, and pricing trends | ● | ● | ● |
| Customer concentration, contract continuity, and margin sustainability | ● | ● | ● |
| Month-by-month earnings analysis | ○ | ● | ● |
| Run-rate, pro forma, and accounting policy review | ○ | ● | ● |
| Working Capital and Debt | |||
| Working capital trend analysis | ○ | ● | ● |
| Debt and debt-like item schedules | ○ | ● | ● |
| Receivables and payables aging, including DSO and DPO | ○ | ● | ● |
| Working capital peg and net debt bridge analysis | ● | ||
| Balance Sheet and Risk | |||
| Fixed asset rollforward, sustaining capital expenditure, and deferred maintenance analysis | ○ | ● | |
| Review of unrecorded liabilities, contracts, leases, and commitments | ● | ||
| Deliverables | |||
| Written Quality of Earnings report and findings discussion | ● | ● | ● |
| Key findings and red flag summary | ● | ● | ● |
| Source-linked Excel databook | ○ | ● | ● |
| Management interviews with the seller, as needed | ○ | ● | ● |
| Transaction-related financial support and lender coordination, as applicable | ● | ||
Additional Scope Available
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Working capital peg and purchase agreement support May be included in comprehensive engagementsScoped separately
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Tax diligence and exposure reviewScoped separately
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Transaction structure and tax modelingScoped separately
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Forward projections and pro forma modelingScoped separately
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Additional entities beyond the agreed scopeBased on complexity
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Sell-side / Vendor Quality of EarningsScoped separately
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Accelerated deliverySubject to availability
Frequently Asked Questions
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A Quality of Earnings report analyzes a company's financial performance to help determine how much of its reported earnings are accurate, recurring, and sustainable. It can also identify adjustments, unusual expenses, and potential financial risks.
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The required analysis may include historical and trailing 12-month cash activity, reported earnings, add-backs and adjustments, customer concentration, contract continuity, and the sustainability of revenue and margins.
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The required QoE must be completed by an independent financial professional for the benefit of the lender, rather than by the buyer or seller.
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Lenders will use the earnings determined through the QoE when evaluating qualifying transactions. If normalized earnings differ from the figures originally presented, it could affect debt service coverage, financing structure, or other aspects of the deal.
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Under the new SBA requirements, the required QoE must be performed by an independent, experienced financial professional for the lender's benefit. A report prepared by or for the borrower or seller cannot satisfy that requirement. Buyers should coordinate with their lender regarding the specific requirements for their transaction.