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Quality of Earnings

Turning Financial Data into Decision-Making Power

Investors are increasingly scrutinizing the quality of financial reporting and a company's financial health. Integrity and transparency in financial disclosures are now more critical than ever in deal-making. A comprehensive Quality of Earnings (QoE) report is essential to ensure that a deal reaches a successful close, providing clarity and confidence to all stakeholders.

Our team is here to serve as your trusted business partner throughout the transaction process, offering robust financial due diligence services, including QoE reports. Additionally, our consulting services deliver insights into a company’s earnings quality and provide actionable recommendations to mitigate potential risks and capitalize on opportunities, such as tax benefits.

Partner with Berman Hopkins to ensure a seamless transaction, starting with a detailed QoE report that supports your acquisition strategy and enhances investor confidence.

What is the Quality of Earnings

Quality of Earnings (QoE) report is crucial to the due diligence process in private equity acquisitions. The report provides a clear view of a company's operations and cash flows by identifying sustainable earnings, trends, working capital needs, forecasting assumptions, key personnel and accounting systems, and other qualitative and quantitative observations.

We Underwent an Audit Last Year. Why Do We Need a QofE Report?

A financial statement audit provides a snapshot of a point in time as to how a company performed financially. However, an audit may not be the sole indicator of the sustainability of company earnings. By examining revenue, expenses, and operational consistency, a QoE report helps private equity groups assess the long-term viability of a target company, reducing the risk of unforeseen financial challenges.

Buyers and sellers are primarily concerned with the valuation of the company. Since valuation is based on a multiple of EBITDA (earnings before interest, taxes, depreciation, and amortization), a Quality of Earnings (QoE) report plays a crucial role in assessing the sustainability and quality of a company’s earnings. Differences in valuation opinions can often lead to delays in finalizing a transaction. A QoE report helps bridge this gap by providing an in-depth analysis of earnings sustainability, ensuring the deal progresses smoothly and stays on track.

How Can a Company Benefit from a QofE Report?

Financial Due Diligence

Our financial due diligence process includes a thorough Quality of Earnings (QoE) analysis, which goes beyond the numbers to assess key trends, relationships, and the sustainability of earnings. In addition to QoE, we analyze working capital, evaluate the company’s financial forecasts, and provide qualitative and quantitative insights to help make informed decisions. Partner with Berman Hopkins to gain the financial clarity needed to make confident, informed decisions and move forward with your acquisitions with certainty.

Tax-Efficient Solutions

We offer a full suite of deal advisory services designed to support private equity groups throughout the M&A process. Our services include:

Reviewing LOIs and transaction documents to ensure appropriate tax language
Structuring deals for maximum tax efficiency
Reviewing and analyzing due diligence items, such as tax returns and financial statements, for accuracy and proper reporting
Conducting interviews with the target company to identify tax and financial issues
Providing gain calculations and analysis of the tax consequences of the deal
Assessing tax and financial risks associated with the transaction

Five-Step Approach

We take a structured, risk-focused approach to every Quality of Earnings engagement.

Our five-step process ensures accuracy, efficiency, and insights you can trust.

Pre-Engagement Call

Discuss key objectives, identify target company, and establish expected timelines.

Data Request
List

Provide an initial request for documentation to management.

Management
Interview

Gain an understanding of key financial and operational areas.

Interim
Findings

Review and discuss preliminary observations and adjustments.

Final
Report

Deliver report with normalized EBITDA, balance sheet items, and key financial trends.

When We Say Experts,
We Mean Experts.

We have a dedicated team of professionals that has the in-depth experience, knowledge, and skill to bring new ideas and solutions to help you find long-term success. Below is a list of accredited affiliations and associations our advisory team work with on a regular basis.