As a component of due diligence services, Vallit provides QofE reports for parties involved in an M&A transaction, whether that be the acquirer, seller, or other party vested in the transaction. Our primary goal is to identify and assess risks in the target company that would prevent the company from performing in the future as it has performed in the past.
An integral part of performing a QofE report is the development of “normalized EBITDA” for the target company. This process includes, but is not limited to:
- Analyzing revenue by component, customers, and product/service lines
- Identify revenue concentrations
- Review of contract risk
- Analysis of historical trends
- Identification of one-time, non-recurring transactions
- Analysis of fixed versus variable costs
- Analysis of management’s impact on operations – Key Person Issues
- Identification of unusual trends
- Review of related party transactions
- On-going working capital requirements
Analyzing the balance sheet also represents an integral part of performing the QofE analysis. This analysis includes, but is not limited to:
- Performing a proof of cash
- Analysis of current and historical contract backlog
- Analysis of key reserves, allowances, and estimates
- Review accounts receivable and accounts payable reconciliations and aging analysis
- Identification of contingent, unrecorded and off-balance sheet liabilities
- Determination whether there is a working capital surplus or deficiency as of the transaction date
An analysis of any pro-forma projections is developed. This analysis typically includes:
- A thorough understanding of the assumptions utilized in any financial/cash-flow projections
- The development of multiple financial projection scenarios (sensitivity analysis)
Other elements of the QofE analysis would include:
- Analysis of historical and industry financial ratios and statistics
- Review of significant and/or unusual accounting policies
- Evaluate changes in accounting methods, principles, polices, procedures and practices
- Identify possible tech issues and related safeguarding of assets and data
- Identify possible tax compliance issues
- Identify other possible litigation areas such as HR, environmental, insurance coverage, etc.
In addition to the QofE consulting services, Vallit provides customized due diligence consulting services based on the needs of the party requested such services.
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Vallit is focused solely on dispute consulting, business valuation and forensic accounting. Our senior team members have testified over 200 times in Federal, State and International courts. Our dispute expertise ranges from family law to complex commercial and intellectual property matters in a wide variety of industries. In non-disputes, our valuation reports are relied on by estate and trust attorneys, auditors, and business decision makers for tax, financial reporting and transaction purposes.