Our most common deliverable is a full-scope Quality of Earnings report, but we frequently undertake engagements with a reduced scope, limited reporting, or both (as described below).
We often share and discuss our reports with interested third parties upon our client’s request.
Evaluate the quality of reported results and normalize for non-recurring and non-cash items.
Evaluate historical and pro forma EBITDA adjustments proposed by the target.
Perform analyses on: i) gross margin by service line, product, division, and customer (inc. changes in price vs. volume), ii) operating expenses (inc. human capital), iii) customer and vendor relationships, iv) seasonality, and v) other key performance indicators.
Assess the accounting systems, personnel, processes, and controls and the reliability of target-provided information. Comment on the ability of management to prepare meaningful financial and operational reporting on a timely basis.
Analyze monthly trends in NWC to assist in developing targets for purchase price adjustments and determining the size of required credit facilities.
Evaluate the realizability of assets and completeness of liabilities. Analyze composition/age of assets and assess reserve methodologies. Analyze capex by major category/ nature. Analyze the nature of accrued expenses (inc. impact of estimates). Identify unrecorded liabilities.
If applicable, understand the allocation corporate costs included in division results and what costs will be required for the division to operate on a standalone basis after separation from the parent.
Understand critical success factors and assess significant assumptions driving the achievability of near-term results. Understand broad assumptions driving the achievability of long-term results.
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