By Sergei Mochtchenkov, CFA
Where value is lost
Value can be lost when an owner cannot substantiate an adjustment or explain a sudden margin change. A buyer may exclude disputed EBITDA or revisit the working capital assumptions. Sell-side diligence makes the evidence and uncertainty visible before that discussion; it does not guarantee a higher valuation, a faster sale or acceptance by the buyer.
Preparing before market
Before going to market, reconcile monthly statements to the ledger, collect support for owner expenses and unusual items, and review customer revenue and AR/AP aging. Separate correctable data gaps from commercial risks that need disclosure. A clear databook and adjustment schedule give management a consistent basis for answering questions rather than reconstructing the case during negotiations.
Who benefits most
The work is especially relevant when proposed add-backs materially affect the earnings case, records need conversion or reconciliation, or the business has significant working capital swings. The site's stated fit is a $2M–$50M revenue business with transaction-level records available. The decision still depends on the deal stage, expected users and whether unresolved issues can be investigated in time.
When not to commission one
Do not commission a QoE as a substitute for a required audit or to produce a predetermined EBITDA figure. If transaction-level records are unavailable, address access and record quality before agreeing to a full diligence timetable. A narrower readiness scope may be a better first step when the immediate need is to identify gaps rather than deliver a full transaction report.