What are the benefits of performing a sell side QofE before initiating a sale process?

Conducting a sell-side quality of earnings (QoE) analysis before selling your business can be a major opportunity to improve the results of a prospective sale process. A QofE involves a thorough examination of your company's financial statements, operations, and accounting practices to provide potential buyers with a clear and accurate picture of your business's financial health (and in particular to what extent there are any major deviations from GAAP accounting). Here are some key reasons why a sell-side QoE analysis can be very beneficial:

  • Enhances Credibility: A QoE analysis conducted by a reputable third-party accounting or advisory firm adds credibility to your financials. Buyers are more likely to trust the financial data when it has been independently verified.
  • Maximize Valuation: A detailed QoE analysis can identify areas where financial performance can be optimized or where potential issues may arise during due diligence. A QofE can also help you understand the various financial metrics that are important to your future buyer and can help you negotiate your valuation from a position of strength. Lastly, there also may be many “one-time” adjustments that you should be considering when presenting your EBITDA in an investor presentation.
  • Minimize Surprises: By conducting a thorough QoE analysis, you can uncover any financial or operational issues that might be discovered by buyers during their due diligence process. This helps you address and resolve these issues proactively, reducing the likelihood of surprises that could derail the deal or lead to unfavorable negotiations, especially after you’ve spent so much time talking to prospective investors.
  • Mitigate Risk: Identifying and addressing financial and operational risks through the QoE analysis can help reduce the risk of post-sale disputes, warranties, or indemnities. It can also reduce the risk of the deal falling apart due to unexpected issues which is pivotal given how time intensive M&A can be!

In summary, conducting a sell-side QofE can help you 1) present your business in the best possible light, 2) attract quality buyers, and 3) navigate the sale process with greater confidence & control.


The article was written by Alex Silensky — professional business plan writer from OGS Capital.