Financial Due Diligence

Quality of Earnings (QoE) is the foundation of effective financial diligence. We provide a detailed analysis of adjusted EBITDA, normalizing one-time and non-recurring items to present a clear picture of sustainable earnings. Our approach focuses on:

• Analyzing historical financial performance and understanding revenue and profitability trends
• Normalizing P&L activity to arrive at an adjusted EBITDA reflective of true operational performance
• Evaluating revenue recognition practices and the quality of underlying revenue streams
• Bridging operating performance between periods and reconciling cash flow to EBITDA
• Providing pro-forma adjustments and synergy analyses where relevant to the transaction

Working capital is often a key negotiation point in M&A transactions. We provide detailed working capital analysis that helps our clients understand cash needs, seasonal patterns, and appropriate target calculations:

• Analyzing historical working capital trends and identifying drivers of volatility
• Computing normalized working capital targets based on operational requirements
• Evaluating key balance sheet accounts for quality, completeness, and accuracy
• Identifying working capital optimization opportunities
• Supporting purchase agreement negotiations with data-driven analysis

Beyond earnings quality, we conduct comprehensive analysis of balance sheet items, debt structures, and accounting practices that could impact transaction value or post-close operations:

• Performing rigorous balance sheet reviews to identify potential issues
• Analyzing debt and debt-like items, including off-balance sheet obligations
• Evaluating judgmental accounting topics and revenue recognition practices
• Assessing contingent liabilities and related party transactions
• Identifying standalone costs for carve-out situations and evaluating finance function capabilities

Our involvement extends beyond the delivery of a diligence report. We act as trusted advisors throughout the deal process, providing:

• Pre-LOI preliminary analysis and real-time responsiveness to evolving deal dynamics
• Support and advice regarding financial sections of purchase and sale agreements
• Support in preparing for Management presentations or buyer calls, responding to buyer inquiries and collaborating with bankers on dataroom management.
• Development of financial models, sensitivity analyses, and liquidity assessments
• Post-diligence support during negotiation and closing processes