Quality of Earnings
Quality of Earnings Report Services for Buyers, Sellers & Lenders
Equirium Analytics delivers independent, CVA-led quality of earnings reports that show what a business really earns, so buyers, sellers and lenders across the US can price, negotiate and finance deals with confidence.
What Is a QoE Report?
What Is a Quality of Earnings Report and Why Use a Specialist ?
A quality of earnings report (QoE report) is an independent analysis of a company’s historical earnings that separates recurring, cash-backed profit from one-time items, accounting inconsistencies and owner-specific expenses. The result is normalized, sustainable EBITDA: the earnings figure a buyer, seller or lender can rely on when pricing or financing a deal.
A quality of earnings report matters because most private-company deals are priced as a multiple of EBITDA. Every dollar of earnings that does not hold up in diligence is multiplied into the purchase price, so small errors in the earnings base become large errors in value.
Consider a simple example. A seller presents $2.0 million of adjusted EBITDA, and $200,000 of the add-backs cannot be supported. At a 6x multiple, that gap puts $1.2 million of purchase price at stake. A specialist QoE review finds the gap early, before terms harden and before the other side uses it to re-trade the deal. (Illustrative example only.)
A specialist brings more than bookkeeping review. Quality of earnings work requires judgment on which adjustments a market participant would accept, how working capital should be set, and which obligations reduce equity value. That judgment is what makes the findings defensible at the negotiating table.
Know What the Business Really Earns Before You Sign the Deal
Get an independent, CVA-led quality of earnings report that tests adjusted EBITDA, cash and working capital before terms harden.
What Does Our Quality of Earnings Analysis Cover ?
Our quality of earnings analysis examines the earnings, cash and balance-sheet items that drive deal value. Scope is tailored to each transaction, and a full engagement typically includes the six components below.
We rebuild EBITDA from reported figures and document every normalization adjustment. The EBITDA bridge shows, line by line, how reported earnings move to adjusted earnings, with the support and rationale behind each add-back.
Revenue quality analysis tests how durable the top line is. We review customer concentration, recurring versus one-time revenue, pricing and volume trends, churn, and the timing of revenue recognition.
A proof of cash reconciles bank statements to the books for the review period. It confirms that reported revenue and expenses are backed by real cash movements, which is one of the clearest tests of earnings quality.
We analyze trailing monthly net working capital to set a normalized level, known as the working capital peg. The peg is negotiated in the purchase agreement, and any shortfall or excess at closing adjusts the final price.
Debt-like items are obligations that reduce equity value but may not appear as debt on the balance sheet. Common examples include deferred revenue, accrued bonuses, unpaid taxes, customer deposits and deferred capital expenditure.
Every engagement ends with a written summary of findings and a supporting databook, which holds the detailed schedules behind each number. The databook lets buyers, lenders and advisors trace every conclusion back to source data.
Quality of Earnings Services Across the US
Equirium Analytics provides quality of earnings services to businesses, buyers and lenders across the United States. Engagements run remotely through secure data rooms and scheduled video sessions, so location never limits your options.
If you have been searching for quality of earnings near me, a local office matters far less than rigour, independence and responsiveness. We work with management teams, deal advisors and lenders wherever the business is based.
Our quality of earnings service reflects the realities of US lower middle-market deals: owner-operated businesses, cash-basis or tax-basis books, multi-entity structures and lender-driven diligence timelines.
Which Quality of Earnings Transaction Services Do You Need ?
The right quality of earnings transaction service depends on your role in the deal, your timeline and who will rely on the report. Most US engagements fall into one of four scopes.
A sell-side QoE is commissioned by the business owner before going to market. It surfaces issues while there is still time to fix or explain them, supports a credible asking price, and shortens buyer diligence.
A buy-side QoE is commissioned by the acquirer, usually after a letter of intent (LOI) is signed. It independently validates the seller’s numbers and gives the buyer evidence to confirm, adjust or restructure the offer.
Many acquisition lenders, including SBA 7(a) lenders, ask for a third-party quality of earnings review before approving financing. Requirements vary by lender and loan size, so we confirm the lender’s expectations during scoping and build the report to match.
A QoE Lite is a focused review for smaller transactions or early-stage diligence. It concentrates on the highest-risk areas, usually adjusted EBITDA and proof of cash, at a lower cost and on a shorter timeline.
Selling Your Business? Defend Your Valuation Before Buyers Start Digging In
A sell-side QoE surfaces issues early, supports a credible asking price and shortens buyer diligence, keeping your deal on track.
When Do You Need a Quality of Earnings Report ?
You need a quality of earnings report whenever a significant financial decision depends on a private company’s true earnings. The most common triggers in US transactions are:
- Preparing to sell a business and wanting to defend the valuation before buyers dig in.
- Signing an LOI to acquire a company and needing to verify the numbers behind the offer.
- Securing acquisition financing, where a lender requires independent support for cash flow.
- Private equity, independent sponsor or search fund acquisitions, where QoE is a standard diligence step.
- Recapitalizations and minority investments, where new capital is priced on historical earnings.
- Partner buyouts and shareholder transitions, where both sides need a neutral view of earnings.
Why Equirium Analytics ?
Equirium Analytics is a quality of earnings firm built on valuation expertise. That combination matters, because a QoE adjustment only counts if it holds up when the business is priced.
Valuation-grade rigour.
Our QoE work is led by valuation professionals, so every adjustment is tested against how buyers and lenders actually price earnings.
CVA-led US practice.
US engagements are led by a NACVA Certified Valuation Analyst (CVA) and follow professional valuation standards.
Independence.
We have no stake in your deal outcome, so our findings are objective and defensible.
Clear timelines.
We agree on a schedule at scoping and update you at each stage, so diligence never stalls the deal.
NDA-first confidentiality.
Every engagement starts with a non-disclosure agreement, and data moves through secure channels only.
Which Industries Do We Provide Quality of Earnings Reports For ?
Equirium Analytics provides quality of earnings reports across the industries most active in US lower middle-market deals. Each industry has its own earnings risks, so our analysis focuses on the issues buyers and lenders scrutinize most in that sector.
SaaS & Technology
ARR and MRR quality, churn, deferred revenue
Healthcare Services
Payer mix, collections vs. billings, provider pay
Manufacturing
Inventory valuation, standard costing, capex mix
Wholesale & Distribution
Inventory reserves, vendor rebates, gross margins
Construction & Contractors
WIP schedules, over/under billings, backlog
Home Services (HVAC, Plumbing)
Seasonality, technician pay, service agreements
E-commerce & Consumer Brands
Returns, ad spend, marketplace fees, inventory
Restaurants & Franchises
Cash sales testing, unit EBITDA, royalty revenue
Transportation & Logistics
Fleet capex, fuel costs, driver compensation
Professional Services
Unbilled WIP, partner pay, client concentration
Other sectors
Not seeing your industry?
Our quality of earnings framework adapts to any operating business.
How Do We Perform a Quality of Earnings Analysis ?
We perform a quality of earnings analysis by combining financial due diligence with a valuation professional’s view of how each adjustment affects price.
Every add-back is tested against one question: would an informed buyer actually pay for these earnings?
Basis review
We assess how the books are kept (accrual GAAP, cash basis or tax basis) and convert to an accrual view where needed for comparability.
Normalization adjustments
We evaluate owner compensation against market levels, non-recurring items, related-party transactions, out-of-period entries and discretionary expenses.
Run-rate and pro forma adjustments
Where justified, we reflect changes such as new contracts, lost customers or cost changes that affect forward earnings.
Management interviews
We discuss findings with management to understand context and confirm the support behind each adjustment.
Tie-out to value
We show how adjusted EBITDA, the working capital peg and debt-like items flow into the price and deal structure.
Who We Serve?
We prepare quality of earnings reports for the parties most often involved in US private-company transactions:
Preparing for a sale, recapitalization or partner buyout.
Running platform and add-on acquisitions.
Acquiring their first business.
Buying competitors, suppliers or complementary businesses.
Including banks, SBA lenders and private credit funds, financing acquisitions.
Making direct investments in private companies.
Our Process
Our quality of earnings process moves in six clear steps, so you always know what comes next:
We understand the deal, your role and your timeline, then confirm scope and fees in writing.
We issue a tailored request list and set up secure document exchange under NDA.
We perform the analysis and work through open questions with management.
We share preliminary findings and key adjustments for your review.
We deliver the final quality of earnings report with full supporting schedules.
We remain available to walk buyers, lenders or advisors through the findings.
Buying or Financing an Acquisition? Verify the Numbers Behind Every Add-Back
Our buy-side and lender-ready QoE reports validate seller earnings, flag debt-like items and give you evidence to negotiate.
Frequently Asked Questions
Get Your Quality of Earnings Report
A quality of earnings report gives every party in the deal a shared, defensible view of what the business earns. Equirium Analytics combines CVA-led valuation expertise with independent, NDA-first financial due diligence to deliver findings that hold up at the negotiating table.
Your next step is simple: share your last three years of financials and your deal timeline, and we will confirm scope, timeline and a written quote within [VERIFY: one business day].