Quality of Earnings for Buyers and Sellers in M&A Transactions
Whether you're buying or selling a business, our QoE reports equip you with the insights needed to navigate the transaction process confidently.
A Quality of Earnings (QoE) analysis is a comprehensive review of a company's financial records to assess the sustainability and accuracy of its earnings.
It helps identify any anomalies, non-recurring items, or accounting practices that may distort the true financial performance, providing a clearer picture of a company's operational health and profitability.
A QoE helps both buyers and sellers address potential concerns upfront, ensuring a faster and more efficient transaction overall.
QoE Report Contents
Our QoE reports are tailored to meet your specific needs and objectives. Typical contents include the following:
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Summary of the company's financial performance.
Key adjustments to earnings.
Major risks or opportunities identified.
Conclusion on the quality and sustainability of earnings.
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Revenue breakdown by product, service, geography, or customer.
Analysis of recurring vs. non-recurring revenue.
Identification of revenue concentration risks (e.g., reliance on a few customers).
Examination of revenue recognition policies and practices.
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Breakdown of major expense categories (e.g., COGS, SG&A, R&D).
Identification of non-recurring or unusual expenses.
Analysis of expense trends and drivers.
Evaluation of cost structure efficiency.
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Normalize earnings to reflect true operating performance.
Calculation of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).
Adjustments for non-recurring items (e.g., one-time gains/losses, restructuring costs).
Adjustments for owner-related expenses (e.g., discretionary spending, excess compensation).
Adjustments for non-operational items (e.g., interest income, foreign exchange gains/losses).
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Analysis of operating, investing, and financing cash flows.
Comparison of cash flow to reported earnings.
Assessment of working capital requirements.
Analysis of cash flow drivers and sustainability.
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Detailed financial statements (income statement, balance sheet, cash flow statement).
Supporting schedules (e.g., revenue by customer, expense breakdowns).
Methodologies and assumptions used in the analysis.
QoE for Buyers
Mitigate Risk: Avoid overpaying or acquiring a business with hidden liabilities
Accurately Value: Justify purchase price based on normalized earnings.
Improve Operational Insights: Plan for post-transaction cash flow needs and avoid liquidity issues.
Support Financing: Secure financing more easily by demonstrating the stability of the target's earnings.
QoE for Sellers
Maximize Sale Price: Provide a clear, data-backed explanation of your company's earnings and valuation.
Showcase Strengths: Build trust and credibility upfront and make your business more attractive to buyers.
Improve Negotiation Position: Equips sellers with data to defend their valuation and leverage better deal terms.
Speed Transaction Process: Address potential financial questions upfront and streamline the due diligence process.
Meet Our QoE Team Leadership
Mark Haddad
Partner, M&A Transaction Advisory
Location: Tampa, FL
Services: Quality of Earnings, Business Valuation, Budgeting and Forecasting, Financial System Implementation
Industries: Healthcare, Manufacturing, Business Services, Alternative Energy
Education: BBA - University of Michigan
Mark is a Partner with Chief Perspective’s M&A Transaction Advisory practice, specializing in Quality of Earnings, Business Valuation, and M&A Transaction Support. He has over 15 years of experience working as an advisor within the buy-side and sell-side investment banking, private equity, venture capital, and valuation advisory space and as a CFO for several high-growth middle-market companies.
Mark brings a wealth of transaction knowledge and strategic insight to his clients. His background advising on high-stakes mergers and acquisitions, structuring complex financial transactions, and driving value creation in portfolio companies allows him to provide unparalleled guidance to clients looking to buy or sell businesses.
Why Choose Us
Experienced Professionals
Our team has extensive experience in preparing high-quality QoE reports that have increased valuation and decreased time to close for 100s of transactions.
Industry Expertise
We are CFOs who have sat in your position - having worked in many companies in the healthcare, business services, manufacturing and energy sectors.
Quick Turnaround
We deliver our QoE reports in as little as 2 to 3 weeks from start to finish.
Confidential and Reliable
We uphold strict confidentiality and deliver reliable, detailed reports you can trust.
CEO - Healthcare Services Company, Acquired by Private Equity
"The Quality of Earnings report provided by Chief Perspective was instrumental in closing our recent acquisition. Their insights were invaluable!"
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