Financial Due Diligence & Quality of Earnings

Our Due Diligence Practice is Unique. It is Not Based on a Series of Checklists But on Decades of Experience as Forensic Accountants and Restructuring Experts Dealing with Actual Transactions

Due diligence is a precautionary process that reduces transaction risk by collecting and analyzing the material facts of the other party in a business transaction. This enables buyers, investors, lenders, partners and other potential stakeholders in a transaction to fully assess the risk of a transaction. Our services in this area include financial due diligence and can include the preparation of operating budgets, credible forecasts, business integration recommendations and business assessments. Areas analyzed by our team include:

• Quality of earnings and cash flow reporting
• EBITDA bridge analysis
• Quality of financial, inventory, billing, and accounting systems
• Appropriateness of accounting policies and procedures
• History of and likelihood of audit adjustments to interim financial results
• Quality of collateral to secure the transaction in coordination with our Appraisals division
• Potential for off book assets & liabilities and other contingencies
• Quality of internal controls, management routines and oversight
• Assessment of past accuracy and future reasonableness of projections of future financial performance
• Proof of cash
• Strength of financial staff
• Customer and vendor concentration risk assessments
• IT and systems infrastructure review
• Foreign Corrupt Practice Act risk assessment

We are uniquely qualified to analyze commercial and financial information with a high standard of care and attention to potential risk. We have developed our expertise through actual transaction experience and by providing forensic accounting services related to countless disputes over failed transactions. We have converted this experience from the back-end to a front-end due diligence practice that is national in scope. We approach every assignment with an investigative mentality, and we communicate our findings in detailed, concise reports.

Quality of Earnings is a Critical Component of Financial Due Diligence

A quality of earnings report is a critical step in the due diligence process because it assesses the sustainability and accuracy of historical earnings, as well as the probability of future projections. We analyze a target company’s historical financial statements and comparable data on similar companies to accurately generate a benchmark and forecast earnings potential.

A full scope quality of earnings report documents risks in a company targeted for an acquisition and assesses three distinct items in a report, including: cash versus non-cash, recurring versus non-recurring and core business versus external factors. This type of reporting provides an independent review of the target company and can often uncover risks or liabilities missed in the buyer’s initial assessment. Additionally, it can be used at the board level to provide reassurance that an acquisition is predicated upon sound data. We deliver comprehensive, accurate reports to ensure clients receive information that might impact on potential acquisitions.