Is a Sell-Side Quality of Earnings Report Worth It?
In this segment of Weeks Weekly, Ed Weeks Jr. explains the concept of a sell‑side Quality of Earnings (QoE) report and why a seller might commission one before putting a company on the market. He notes that in any sizable M&A transaction the buyer’s accounting firm will scrutinize the seller’s earnings, and the resulting number becomes the foundation of the deal. A sell‑side QoE is an independent firm performing the same analysis ahead of time, testing the seller’s add‑backs, assessing the recurrence of revenue, normalizing working capital levels, and conducting a proof‑of‑cash that reconciles book entries with actual bank movements. The purpose is to give the seller early visibility into potential adjustments, allowing them to address issues proactively and improve the credibility of their financials before buyers begin due diligence.
