Sell-side QoE to validate carve-out financials

searcher profile

December 17, 2025

by a searcher from The University of Chicago - Booth School of Business in California, USA

I'm working on a carve-out deal where the viability depends on the validity of the management prepared carve-out financials. It's modest sized and self-funded, and lenders so far have indicated that QoE would be required on their end (and not CPA review) and of course I would want QoE for my own peace of mind. I wish they would have had an accountant prepare this before bringing to market, but here we are. The current negotiated deal is on the edge of lending standards, so if there is an issue that causes a need to renegotiate or halt, I'd like to uncover that now. To that end, I am thinking of splitting this up into two phases: (1) request a seller-paid deliverable which is focused on the carve out income statement to get to a viable restatement based on standalone economics; followed by (2) a buyer-paid portion with balance of deliverables that would be expected regardless of being a carve-out. To be clear- I understand that a buyer-paid QoE is absolutely key to protecting my interests, and have no intent to trust sell-side QoE. I have decent financial acumen and have reasonable confidence I could identify major anomalies if the QoE was biased. Has anyone done something similar? Is this a viable construct? The seller via the broker has expressed willingness to co-invest in a single vendor of my selection, though I'm not sure if that creates any conflicts of interest or other issues? Thank you!
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commentor profile
Reply by a professional
from Stanford University in Healdsburg, CA 95448, USA
For carve outs, it's common to have some substantiation of the financials and structure of the assets and business operations being divested. I think you're well within your rights to ask them to produce a professionally prepared scenario of what they're trying to sell to you. As you mention above, you need to confirm for your own purposes, but part of selling a business is presenting what is being sold in a reliable and rational way. If they push back you can always remind them that the reps and warranties of the definitive agreement will require them to stand by what they're presenting, so they should be interested in their own analysis for their own purposes. Thanks for the tag, ^redacted‌.
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Reply by a professional
from Liberty University in Fort Myers, Florida, United States
I agree with your general thoughts on the post. While there are objective matters in a QoE, the QoEs consultants are hired on my a party and have a duty for their client. You would likely want someone on your end to have your best interests in mind. For a carve out, you would generally want to make sure the full consolidated picture is accounted for in their financials. Then analyze the allocations from the total picture to the portion you are purchasing. After that, then you would want to analyze the business you are purchasing. If you just skip to step 3 you can lose some comfort around the accuracy of any missing items on your carved our portion. You can attempt to cover that gap by using supplemental reports, but the risk of not knowing what you don't know is greater. I think having a sell side QoE is a great idea, since it will be a good amount of work for the seller. This way, if they go through all the work and the deal falls through, they have the work done for next time (instead of losing it since they didn't pay for it). But, as you mentioned, it would be good for you to hire your own QoE to analyze their report, and reperform any procedures that are needed. Splitting QoE fees between the buy and sell side is generally not recommended and will create an awkward conflict of interest/duty. The better alternative would be for there to be some reimbursement at closing or something to that effect, and allow for the QoE provider to have a clear understanding of their client and who they have a responsibility to. Happy to connect in more detail if you would like.
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