Due Diligence

Giving You Confidence in Your Transaction

The purchase or sale of a business is unquestionably one of the most important decisions a company will face. As a buyer, you need to be confident in your decision. As a seller, you want to ensure you won’t face surprises when a deal is on the table.

Partnering with Mowery & Schoenfeld’s expert transaction advisory services team for buy- or sell-side due diligence will give you the peace of mind and assurance you need to close the deal. Our experienced professionals offer objective, thorough insights that help you navigate risks, uncover opportunities, and make informed decisions for successful transactions.

Michael Kidd >

Partner, Transaction Advisory Services Leader

Mark Hallgren >

Transaction Advisory Services Director

Insights

Quality of Earnings (QoE) Report: Pre-Sale Due Diligence >

Determining the Right Price

Whether you are buying or selling a company, you want to negotiate the most favorable deal. Our rigorous analysis gives you a thorough understanding of the target company’s financial situation. We offer objective buy-side and sell-side due diligence services that examine and validate the financial aspects of the deal, showing you risks and opportunities before you proceed.

The typical due diligence engagement spans approximately four weeks, with the Quality of Earnings (QoE) report serving as the centerpiece of our review. We combine thorough financial and tax diligence into our QoE process, working alongside the legal team so everything keeps moving forward smoothly.

When you work with Mowery & Schoenfeld on a Quality of Earnings (QoE) due diligence engagement, we provide you with an assessment that confirms the earnings and tax information you were provided by the target company. Our due diligence process might uncover issues like revenue or expenses being recorded in the wrong periods, missing expenses, unreported discontinued operations, unfiled or missing tax filings, or questionable add-backs that make earnings look better than they really are. It’s essential to sort these things out before you decide to move forward with buying the company.

Providing Intelligence and Accuracy for Business Growth

Mowery & Schoenfeld has years of experience helping buyers and sellers through successful transactions, assisting with M&A due diligence, search funds, and more. We collaborate with you during the due diligence process to understand the situation from both sides. The result, the QoE report, offers a detailed, comprehensive look into the company’s earnings — an important step in deciding the future of your company.

Our due diligence services include:

Buy-side due diligence: Reviewing financial statements to analyze the quality of earnings and working capital; assessing the purchase price; appraising opportunities, risks, and integration issues; ensuring regulatory compliance; looking at tax attributes, exposures, and compliance considerations; and providing information about the target company’s tax, compensation, and benefits situation.

Sell-side due diligence: Identifying and addressing potential deal breakers early; validating the accuracy of financial statements, including quality of earnings; answering buyer tax diligence questions; providing objectivity and credibility by including investment bankers or other advisors; and offering continuous support to management.

Buy-Side Financial Due Diligence (Quality of Earnings)

The main purpose of buy-side financial due diligence is to give you a straightforward, detailed view of a company’s financial health before you make an acquisition. The Quality of Earnings (QoE) report plays a key role, helping you make informed decisions by digging into the numbers and making sure they reflect the company’s actual earning power.

As part of our process, we normalize EBITDA by taking out one-time charges, legal expenses, owner perks, and other items that can skew the real picture. Our team also evaluates the tax attributes and tax-related assumptions embedded in earnings, finding exposures or opportunities that could impact cash flow, deal structure, or post-close economics.

We take a close look at Net Working Capital (NWC), analyzing trends like seasonality so you’re not caught off guard by cash shortfalls after closing. Additionally, NWC is an important part of the purchase price mechanics at the time of closing that typically requires a normalized level to be delivered to buyer from seller at the time of close.

Revenue quality is another big area we focus on. Our team checks customer concentration and churn rates to see how stable the company’s revenue is. For example, if a few customers make up most of the sales, losing one could materially impact future earnings.

Lastly, we search for hidden debt and liabilities, like historical tax compliance risks, underfunded pensions, or off-balance-sheet obligations, that could impact the purchase price. Our goal is to make sure there are no surprises and that you have all the information you need to move forward with confidence.

Sell-Side Due Diligence: Preparing for Exit

If you’re thinking about selling your business, one of the key questions is how to boost its value before putting it on the market. Doing a sell-side Quality of Earnings (QoE) report is a smart move that helps you highlight your company’s strengths through operational diligence and can make the whole process quicker. By getting this report ready ahead of time, you can tackle risks, resolve any issues around earnings, working capital or taxes, answer buyer questions, and make sure everything’s clear from the start.

A sell-side QoE report also helps you dodge those last-minute price drops or deal delays that can happen when buyers find unexpected issues. It gives you the chance to fix problems early and keep negotiations running smoothly. You can be more proactive by providing buyers with what they need and clearing up any concerns early on.

A sell-side QoE lets you control the narrative about the business. You can show adjusted EBITDA upfront and make the buyer’s due diligence easier. This gives you a chance to make things right and keep the deal on track.

When sellers provide audited financials along with a QoE report, they usually land higher pricing and close deals more quickly. The sell-side quality of earnings process also helps you organize the Virtual Data Room (VDR), so it looks polished and complete to potential buyers, which makes a positive impression and keeps things efficient.

Get Started with Due Diligence from Mowery & Schoenfeld

Looking for a due diligence consultant? Talk to a transaction advisor today.