Overview
A targeted look at the earnings a purchase price is built upon.
Our quality of earnings (QoE) engagements examine the sustainability and accuracy of a company’s reported earnings. We help provide buyers, sellers, and lenders with a clearer picture of a company’s true economic performance, beyond what the financial statements alone can offer. Our QoE engagements focus on identifying non-recurring items, normalizing adjustments to EBITDA, evaluating revenue recognition policies and practices, and assessing working capital trends.
Unlike an audit, QoE engagements are not designed to express an opinion on the financial statements as a whole. Instead, it provides a targeted analysis of the earnings stream that a purchase price is built upon.
Engagement details
What a QoE engagement covers, and what you receive at the end.
Scope
Specifically targets a company’s earnings stream and working capital trends.
Common uses
QoE engagements are commonly utilized as part of mergers and acquisitions and are usually performed from one of two vantage points, buy-side or sell-side.
Value
Provides specified parties with a high degree of confidence in the reliability of the information being analyzed.
Deliverable
Unlike an audit, no opinion is expressed. The typical output for a QoE engagement is an analytical report intended for a specific user.
Who it’s for
Three seats at the same table — each reading the same earnings differently.
Private equity & strategic buyers
An independent view of sustainable EBITDA before the deal closes — the earnings a purchase multiple is actually applied to. QoE findings support financing packages and strengthen positions in purchase price negotiations.
Business owners & sellers
Find the issues before a buyer’s diligence team does. A sell-side QoE surfaces adjustments early, builds a defensible adjusted EBITDA, and reduces the risk of price re-trading late in the process.
Lenders & credit funds
Debt decisions rest on normalized cash flow, not reported results. A QoE analysis helps lenders assess whether earnings can realistically support the proposed debt service before capital is committed.
Buy-side vs. sell-side
Same discipline either way — the difference is who engages us, and when.
The acquirer or investor, typically after a letter of intent is signed.
The company or its owners, before going to market.
During due diligence, before closing.
Ahead of the sale process — often months before buyers are contacted.
Validating reported EBITDA, quality of revenue, customer concentration, and the working capital peg.
Surfacing normalizing adjustments early and preparing a defensible adjusted EBITDA.
Informs the purchase price, the financing, and the terms of the purchase agreement.
Shortens buyer diligence and reduces the risk of late-stage price re-trading.
