Searchfund fam,
I am under LOI on a $10mm purchase price deal. I have four months to complete diligence.
I know "best practice" in the search fund community is to complete a QofE. That said, all advisors that I'm working with on my search (my lawyer, buyside banker, etc.) have suggested that a QofE would be a waste of money for this deal.
I do not want to re-trade this deal - so I see no value in the QofE for those purposes. That said, a QofE would give me a lot of comfort in closing the transaction and stepping into operate the business. The company is a small manufacturing operation ($10.5mm in sales; $2mm in EBITDA). The company has used a very small CPA firm throughout it's history, and the financial records are not pristine - so there would be some comfort in getting the numbers checked. I believe the owner is an honorable man, and I do not believe there are any skeletons in the closet intentionally being hidden.
So my question: what are the real benefits to getting a QofE done at this point in time? Thank you for any guidance and perspective
Quality of Earnings - is it actually necessary?
by a searcher from Dartmouth College
More on Searchfunder
Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
460 views
23 comments
Sign in to see all replies.
Create an account.