Our Financial and Quality of Earnings (QoE) Diligence service is designed to provide you with a comprehensive understanding of the financial health of your acquisition. We understand that maximizing the value of your investment is crucial, and our experts are here to help you uncover hidden opportunities and mitigate risks. Accordingly, we conduct a thorough analysis that includes:

 

Financial Statement Analysis

Our team dives into the historical financial statements of the target company. We meticulously scrutinize income statements, balance sheets, and cash flow statements to gain a clear understanding of the company's financial performance over time. This analysis helps us spot any unusual or one-time items that could affect earnings quality.

 

Normalization of Earnings

We adjust the financial statements to normalize earnings, removing any non-operating expenses, one-time charges, or anomalies that might distort the true picture of the company's operational performance. This process allows us to assess the accuracy and sustainability of earnings.

 

Revenue Recognition

Examining the target company's revenue recognition policies is crucial. We ensure they comply with accounting standards and closely verify the accuracy of reported revenue figures. This step includes a thorough review of contracts, customer lists, and sales backlog.

 

Expense Analysis 

We closely examine the company's cost structure and expense patterns. The objective is to identify any unusual or concerning expenses and to evaluate the adequacy of reserves for items like warranties, litigation, or restructuring.

 

Working Capital Review

The analysis extends to the company's working capital, encompassing accounts receivable, inventory, and accounts payable. We assess working capital requirements and any potential changes anticipated after the acquisition.

 

Due Diligence on Liabilities

We investigate the target company's debt and other liabilities. This includes a comprehensive review of contingent liabilities and off-balance-sheet obligations. Understanding the terms and covenants associated with debt agreements is crucial.

 

Management Interviews

Engaging with key members of the target company's management team is a pivotal step. These interviews provide valuable insights into the company's business operations, growth strategies, and financial forecasts. We aim to identify risks and opportunities from the management's perspective.

 

Quality of Assets

We evaluate the condition and quality of both tangible and intangible assets held by the target company. Special attention is given to assets like goodwill and intangible assets to assess any potential impairment issues.

 

Cash Flow Analysis

Projecting future cash flows under various scenarios is essential. We consider factors like potential synergies or cost-saving opportunities that may arise post-acquisition. Accurate cash flow analysis helps in determining the financial health of the target.

 

Financial Projections

If the target company has provided financial forecasts, we review and analyze them. This entails validating assumptions and assessing the reasonableness of projections, which is crucial for making informed decisions.

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