Inside the Q of E: What Makes or Breaks a Deal скачать в хорошем качестве

Inside the Q of E: What Makes or Breaks a Deal

Quality of earnings reports are where deals actually get made or broken. They verify every number in the LOI holds up under scrutiny and set the foundation for everything that happens post-closing. Matt Estadt is Managing Partner of Transaction Services at CFGI, where he's built their global transaction practice across 32 offices over 14 years. Before CFGI, he spent nearly a decade at Arthur Andersen and PwC conducting financial due diligence. We start with what buyers check first when they open a Q of E report. The adjusted EBITDA number in the trailing 12 months. If it doesn't match the LOI figure, renegotiation starts immediately or the deal structure shifts to creative earnouts. Matt walks through the three core analyses in every report regardless of industry. Normalized EBITDA shows true operating cash flows. Networking capital ensures the business can fund operations from day one without the buyer injecting cash. Debt analysis captures every liability that transfers at closing. These feed directly into purchase agreements and determine pricing adjustments. The conversation gets into contentious territory around add-backs and pro forma adjustments. Management teams push for credit on future synergies, duplicative headcount savings, and renegotiated insurance rates. Matt reveals something that surprised him after 23 years in this business. Buyers are accepting more of these forward-looking adjustments now than five years ago because deal competition forces flexibility. We cover why networking capital causes deals to break more than any other section. Most transactions close on a cash-free, debt-free basis. The seller strips all bank accounts at closing. If the networking capital peg gets set incorrectly, buyers fund operations out of pocket from day one. Worse, the post-closing true-up 60 to 90 days later can trigger massive payments in either direction when the remeasurement comes in wildly different than the peg. Matt explains how Q of E scope shifts by sector. Technology deals require ARR metrics, customer churn rates, and cohort analysis. Healthcare transactions need detailed billing reviews and payer rate verification. Industrial companies with contractor revenue models demand completion accounting scrutiny. The technical details matter. Aged receivables over a year that haven't been reserved shouldn't count toward the networking capital peg. Same with obsolete inventory that won't sell. Trailing 12-month averages fail for high-growth companies where three-month periods better reflect actual operations at closing. What surprised you most in your last quality of earnings process?