Transaction Advisory Services and M&A
Quality of Earnings
Financial Statements may have lots of information needed to understand on a high level about how the business is performing. However, details are key when you are trying to determine the price to sell or buy a business. Specially to make sure that the right decision is buying made.
A quality of earnings report (also referred to as a QOE report) is a vital document during an M&A process when selling, buying, or investing in a business. A QOE report help assess the financial viability of the company while digging deeper into some of the financial statement’s key component. Information such as one-time revenue source, non-recurring and non-operational expenses, a change in production, or significant and/or unusual accounting policies that acts to inflate or deflate a business’ reported performance can be some of the important facts that can be observed during a QOE assessment.
For the seller, the ability to offer a prepared QOE report increases the speed and the likelihood of closing. QOE studies typically take around thirty (30) days. Completing before starting the negotiation process to tender a letter of intent is key to avoid wasting time because time lost may represent a lost opportunity. For the buyer, it represents the opportunity to ask the right questions, understand the exposure to risks, and make more informed decisions before closing a deal.
Financial Due Diligence
All businesses involved as buyers or sellers in an acquisition need to ensure that the financial information they hold is as accurate as possible, not only to prevent paying too much (or in a seller’s case receiving too little) but also to ensure that their governance and risk management objectives are met.
Any organization considering a deal needs to verify all assumptions made. Financial due diligence provides validate the buyer’s or creditor’s investment thesis by verifying the assumptions made when the transaction was negotiated, seeking out issues and opportunities our clients were not aware of, and providing them with data and insight to help formulate a post-transaction plan, by analyzing and validating all the financial, commercial, operational, and strategic assumptions being made.
Buy-Side Support
Transactions of all sizes present unique opportunities and obstacles. Whether you are a corporate strategic buyer, private equity group, family office, mezzanine lender or other financial investor, your unique needs have similar goals: lower risk, enhance transaction proficiency and bolster transaction value. Proper due diligence helps buyers and their lenders structure transactions strategically, and helps sellers realize the strengths and weaknesses of their position.
Some of the services that On Point Strategy can provide during the buy-side due diligence process includes:
Assess the prospective seller's quality of earnings
Analyze cash flows (e.g., capital expenditures, working capital, etc.)
Evaluate company’s forecast
Review on- and off-balance-sheet assets and liabilities
Sell-Side Support
Conducting sell-side due diligence helps increase the probability the sale of a business will be successful. Performed correctly, the process uncovers opportunities for sellers to enhance their company’s value prior to a sale while helping facilitate a faster close time.
Sell-side due diligence is a proactive process that involves identifying and assessing issues and trends that either positively or negatively impact business value from a buyer’s perspective. Business owners gain early, vital insights this way, which can help establish a strategic framework for selling a company later on.
Sell-side due diligence should begin at least six months prior to the anticipated go to market date. This allows enough time for the seller to organize financial information and prepare management for a potential buyer’s due diligence process.
Some of the services that OnPoint can provide during the sell-side due diligence process includes:
Business valuation
Financial modelling
Internal controls assessment
Arrangement of a secure virtual data room for file sharing with the prospective buyers